How to Trade Facebook Stock as Companies Boycott Advertising

Facebook remains under pressure as companies line up to boycott the company's ad platforms in July. Let's look at the charts for the stock.
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Facebook  (FB) - Get Report was hammered on Friday, falling more than 8%. On Monday the selling pressure continued, with shares down about 1%, although bulls were able to bid shares up off the lows so far.

The broader market decline over the past few sessions hasn't helped matters. However, Facebook is under such heavy pressure as more companies begin to boycott its advertising platforms in July.

So far, some of the boycotting companies include Ben & Jerry’s, Coca-Cola  (KO) - Get Report, Starbucks  (SBUX) - Get Report and Honda  (HMC) - Get Report. In total, more than 160 companies are involved.

That’s going to be a top-line issue for Facebook and to some extent, Twitter  (TWTR) - Get Report as well. While Facebook suffered a large one-day hit, the stock is holding up pretty well so far. 

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Trading Facebook Stock

Daily chart of Facebook stock.

Daily chart of Facebook stock.

Friday’s loss was an avalanche of high-volume selling, with Facebook stock breaking below $225. This mark was significant. It was resistance in January and support in May and June.

Once support gave way, the stock traded down to the 50-day moving average, before gapping below this mark on Monday morning. Trying to reclaim this metric now, it will be interesting to see whether it acts as resistance.

If it does, it puts the $200 mark in play. Not only is this level psychologically relevant, but it was also post-earnings support in late-April and May. Further, the 100-day and 200-day moving averages are near $198.

This should make the $200 area a strong support zone if Facebook stock declines that far. It may at least be good for a buy-the-dip bounce trade. 

On the flip side, let’s say Facebook reclaims the 50-day moving average. It then puts the $225 level back in play. It would be quite bullish to see Facebook stock reclaim this mark.

It puts the 20-day moving average back on the table — currently near $230 — followed by resistance at $240.

For now, I would prefer a wait-and-see approach with Facebook stock. That is, wait to see whether it can reclaim $225 or if it dips to $200, then pounce.