Facebook bottomed out with a divergence

Mar 22, 2022

A classic triple bottoming pattern with an MACD divergence to the upside culminated on 3/18/22 with a huge upturn for facebook.

The first bottom with MACD divergence happened on 3/7/22 and was followed by 2 days rapid move to the upside. The nimble options trader could have made good gains on this move. The second bottom was on 3/15/22, and this was lower than the prior bottom with MACD even higher than the first bottom. On this move the gains on out of the money options were much greater.

This chart of FB shows the two bottoms and the MACD divergence on daily price action.

The first move lasted 2 days. Buying the FB weekly 200 calls that expired on 3/11/22, at or near the open on 3/8/22 would have cost around 62c.  Usually we look for options under 10c, but in this instance the 200 calls sufficed for a gain of 300%.

This 30m chart shows the FB weekly 200 calls that expired on 3/11/22

The second lower bottom on 3/15/22 that was very clear on the daily chart, and also had a good MACD divergence on the hourly, further confirming the strength of the chart pattern.

With the second bottom and the strength of the divergence, we considered buying the FB weekly 215 calls that expired on 3/18/22, at or near the open on 3/16/22. These options could be had for around 6c. In 2 days of rapid price movement, these options reached a high of 1.77. Almost 30 times your money if you managed to get out at the high point.

This 30m chart shows the FB weekly 215 calls that expired on 3/18/22

The Options Hunter approach focuses on divergences between the MACD and the price action. We don’t employ other indicators such as RSI, Stochastics or Bollinger bands as we keep our approach simple, straightforward, and repeatable


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