This Trade Could Make You 39% in the Next Two Days : FB

Less than six months ago, traders were hoping for a chance to buy Facebook (NASDAQ: FB) the day the stock began trading. Some traders entered market orders to buy and paid $45 a share. Since then, FB has been in a long downtrend and buyers who got in during early trading have losses of 50% or more if they are still holding the stock. Those positions could be just one of several bearish factors weighing on the stock price when earnings are announced this week.

The biggest indicator of bad news could be Google (NASDAQ: GOOG), which may have offered a preview of what FB will have to say after the close on Tuesday. One analyst summarized Google's disappointing quarter by noting that, "Google, the biggest seller of search-based advertising, hasn't yet translated to mobile devices the success it's had with desktop advertising. Ads generated on smartphones can cost about 40% less than those on traditional computers and about 25%t less than on tablets."

Mobile users were one of the problems that FB noted last quarter. The company reported in recent SEC filings that growth in mobile use has been rising sharply. Almost 20% of Facebook users only access the social networking site from mobile devices, a trend that could have a significant, and negative, impact on FB as mobile use grows.

With concerns about its business model growing, it is not surprising that the trend in FB's stock price has been down.

A potential double-top has formed in the stock with resistance from the top coinciding with resistance from the downside gap formed in July, near the time of the company's first earnings release. This quarter could see a similar pattern if earnings or revenue disappoint, or if the company doesn't offer comments indicating that the future will be brighter.  (more)