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Analysis

Is Facebook Doing Really That Badly?

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

Founded by Mark Zuckerberg in February 2004, Facebook (NASDAQ:FB) is the world’s largest social network. On Thursday, after the earnings report, Facebook stocks went down by almost 20%; the company’s revenue was higher compared to the previous quarter, but the report did not meet expectations. In fact, this happens quite often, but before it did not lead to such plunges. Let’s find out what caused such as a massive selloff. In order to understand it, we’ve got to analyze the major negative events around Facebook since its IPO in 2012.

In June 2013, evidence came that ANB had been gathering information on its users, including their messages and location. The community well understood that such things are common on the web, although companies don’t tend to declare it openly, so that’s why Facebook stocks did not react to this news at all.

A month later, Facebook published a report saying the company had received over 25,000 requests to clarify data collection from 38,000 users; these reports had come from various governments since January 2013, and over 50% of them were accepted and processed. In this case, the market did not show any negative reaction either. In fact, it was quite the reverse, as shares skyrocketed by 26% in June, after the earnings report, and continued rising in August.

In May 2016 Facebook was accused of pubic opinion manipulation, as there was interference in the news algorithm by company employees. The news selection editors were then fired, and new automated algorithms were brought in to replace them; those were criticized afterwards too, though.

Facebook was also accused of intellectual property infringements, unethical attitude towards users, spam, and illegal data processing, but none of these pieces of news could do well enough to prevent the stock from growing. It looked like investors were okay with the company not caring about the ethics, as long as it acquired more users and its profits were high.

In 2018, the Cambridge Analytica scandal, where Facebook was again accused of illegal data processing, triggered a 23% drop in share prices.

In 2015, Aleksandr Kogan created his thisisyourdigitallife app, where he got information on 50 million Facebook users, which he then submitted to Cambridge Analytica that afterwards used them in the US presidental elections.

The UK and the European Parliament then requested data protection information from Zuckerberg, while the US Federal Trade Commission started its own investigation. The stock plunge led to serious losses in the case of some investors, and those issued a legal action against Facebook saying the company had been aware of the data leak but had not taken any appropriate measures and had not admitted it in public.

Of course one can understand why Facebook management feared doing so. Trump was then the synonym of ‘Russian spy’, with Russia being accused of interference in the US elections. If Facebook had admitted Cambridge Analytica had been able to influence the elections, it would have been a suicide.

However, as time passed, the scandal was no longer in the minds of investors. Combined with the Trump rally, US stocks were surging again.

Unfortunately for Facebook management, the scandal did its job a bit later. Rumor had it that some dissatisfied investors were planning to make Zuckerberg resign, although it never was easy, as he was both the Executive Director and the Board Chairman.

Right after that, the UK government announced they were going to fine Facebook $663,000. While this won’t influence the financial state of the company, it was feared that similar measures would be taken by European Parliament and US Congress, where the amounts may significantly higher.

It did not take long for the European Parliament to respond, indeed, as on May 25, the famous General Data Protection Regulation (GDPR) came into effect. This regulation imposed stricter rules of data collection and using them without users’ knowledge. Any GDPR infringement may cost the company 4% of its yearly revenue.

Facebook is headquartered in Dublin, so many of its users (except for US and Canadian citizens) are now governed by this law. In fact, from over 2.0 billion users registered on Facebook, 1.9 billion are under the EU jurisdiction, which makes GDPR a very important issue for the company.

It appeared that Aleksandr Kogan, who created that thisisyourdigitallife app,submitted the data to Cambridge Analytica just let Facebook down. While the data had been always collected this way, this time they were used illegally, which led to those new restrictions.

GDPR is a strict rule, but it does not completely forbid companies from gathering information on users; currently, users are asked at sign whether they agree to submit their data, and in case they don’t, they just won’t be able to log in. So, in fact, nothing has changed much, except for the European Parliament getting the opportunity to fine companies for the new regulation infringements.

So, here’s what we finally have: the scandal did not influence Facebook itself, but led investors to panic. They may even claim their loss through a legal action again, which is quite a common thing in the US. The first action was actually already issued by a certain James Kakuris on July, 27.

Meanwhile, the financial state of Facebook, Inc. needs analyzing to make this puzzle more complete.

Over the last three years, the company’s earnings increased quarter to quarter. Q1 is always a bit of lackluster each year against Q4, but this is quite understandable, as consumer demand increases before Christmas, and the advertisers tend to sped more money.

Among all earnings reports, there was only one when Facebook did not meet expectations. This time, earnings reached $13.23 billion, while the expectations were at $13.36 billion.

If we take all the emotions out and leave only the figures, we’ll see the revenue increased by 42%, the number active users went up by 11%, and ad revenue skyrocketed y 91%, QoQ.

The number of daily users increase is indeed somewhat lackluster, but this is mostly because of the GDPR. Besides, Facebook is reported to have reached its maximum active user number for now and is trying to ‘recruit’ users in other locations, where internet usage isn’t as active. However, the total number of users is at 4 billion for now, which means there is still some more room for growth.

In November 2018, the US will be electing Congress; for Facebook, this means they will have to spend more on security and controlling the damage of the data leak, whether the management wants it or not. This is why the costs are expected to grow by 50% in Q3, which will lead to the revenue going down in both Q3 and Q4.

The bottomline: the company still looks healthy and good for investing, but the quarterly earnings will be going up slower than they used to. Besides, in the lights of the recent fall, more negative news may appear, and this may be pushing prices downward. For now, it may be feasible to just watch how it goes and be ready to buy Facebook low, if this is possible.

Technically, the shares are trading below the 200-day SMA. It was the same after that Cambridge Analytica scandal, but then the price consolidated around the support at $150 and $160, and then went up, with volumes growing during the SMA breakout, which became an additional bullish signal.

This time, the price may well consolidate again before moving directionally, after which investors will be finally able to predict where exactly it will go.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 17 rated postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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Cardano Price Analysis: ADA/USDT Smashes Out of Wedge, but Saved by Critical Demand Zone

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  • ADA/USDT testing a huge area of demand and a breach by the bears could be catastrophic.
  • Cardano Foundation confirm reshuffle, as Michael Parsons, the former chairman, steps down.

ADA/USDT has continued to be victim of downside pressure after its latest bull run. The price had gained a chunky 20%, between 31st October and 6th November. ADA/USDT managed to peak just above $0.08200 territory. This was the highest level seen since 15th October. Shortly after, gradual selling started to take place, to then see all the gains plus much more taken by the heavy bears.  It appears current bull runs are not sustainable, very much vulnerable to being sold- particularly as these tend to happen in an explosive manner within a short time frame.

Cardano News Flow

Cardano this week made an announcement that Michael Parsons, the former chairman, has resigned from his position at the Cardano Foundation. Prior to this rapid departure, there had been much history of community members demanding for him to be removed. The position will be filled by the Council Member Pascal Schmid, a University of St. Gallen graduate and a financial expert. Cardano’s creator, Charles Hoskinson, accused the foundation and Parsons of neglecting their duties, in addition to bringing in close friends and family into top positions within the organization.

Technical Review – ADA/USDT

ADA/USDT daily chart

ADA/USDT is running at three consecutive sessions in the red- a move which is inline with the broader market, a mass cooling across all major cryptocurrencies. The price was forced to drop a hefty 13% in the late part of the session on Wednesday. Price action was initially moving within a wedge pattern. This had been the case since the back end of September. ADA/USDT was contained within this formation.  Given the noted heavy selling pressure that was seen across the market late Wednesday, the lower trend line of the wedge was forced to give way to sellers.

Looking to the downside, ADA/USDT has been saved from further declines thanks to a critical demand zone. The area is seen tracking from $0.07000 down to $0.06000. It has proven to see strong buyers swoop in. The price last traded down here between 12-18th September. Buyers kicked in to then drive ADA/USDT to the north, seeing gains just shy of some 50%. The bulls were able to run the price up to $0.09500 into a known supply area. A peak was seen, and this rally was then gradually sold.

Should the above-mentioned demand area fail to hold and see a daily close below, it could be catastrophic. A development such as described, could leave the door wide open to a fresh wave of heavy selling.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 50 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Pre-Market Analysis And Chartbook: Markets Flat Ahead of Key Economic Data

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Wednesday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,729 0.02%
DAX 30 11,467 -0.05%
WTI Crude Oil 56.16 1.59%
GOLD 1,202 -0.03%
Bitcoin 6,211 -0.80%
EUR/USD 1.1287 -0.01%

As traders awaited the key US economic releases of the week, the Consumer Price Index (CPI) and the Retail Sales report, financial markets were relatively quiet and flat before the Wall Street open, but things got volatile since then, despite the muted CPI reading. The progress in the Brexit negotiations and the liquidation event in crude oil were making headlines today, although the advance in the Pound stalled, as equity markets and in general risk assets are still under clear selling pressure following the turmoil in October. The second half of the week will likely see strong moves across asset classes, and given the negative technicals, odds favor a risk-off shift globally.

EUR/USD, 4-Hour Chart Analysis

The Dollar is consolidation after its move to new 16-months highs on Monday, and for now, the currency failed to confirm the break-out, at least as measured by the Dollar index. The EUR/USD is showing a slightly different picture compared to the broader measure, and the common currency is still in a steep downtrend, even as it is back near the key 1.13 level, retracing a large chunk of Monday’s move.

A durable recovery above 1.13 could signal a failed break-down and another consolidation phase in the pair, with the long-term momentum indicators still being oversold, but the broad downtrend is clearly intact, and long positions should only be considered as short-term trades.

Nasdaq 100 Futures, 4-Hour Chart Analysis

In equities, we continue to see bearish technicals from a broader perspective, and although the post-Fed selloff halted, for now, the re-test of the October lows still seems likely in the coming weeks. The Nasdaq is still relatively weak compared to the other major US benchmarks, and the tech benchmark is the closest to its lows, even after yesterday’s bounce.

The overnight session saw a slight bullish bias in stocks, with the indices holding on to above their weekly lows, but we still view the short-term rally attempts as selling opportunities given the hostile technicals across the globe.

Crude Oil in Turmoil as Copper Holds Support, For Now

WTI Crude Oil, 4-Hour Chart Analysis

The bounce that we have been expecting in crude oil didn’t materialize despite the deeply oversold momentum readings, as the dip below the $58-$60 zone triggered a liquidation event in the commodity. The worst day for oil in 3 years saw the WTI contract falling below $55 per barrel, its lowest level in a year. Today, oil is attempting a recovery, and we continue to expect a rally up to the $63-$65 zone in the coming weeks.

Copper Futures, 4-Hour Chart Analysis

Elsewhere in the commodity segment, we are seeing further signs of weakness, despite the pullback in the Dollar. Gold is having a flat quiet day, so far, hovering near the $1200 price level, while despite the renewed trade-deal optimism, copper failed to bounce higher substantially amid the slight risk-on shift. The industrial metal is trading just above its recent swing low, and a move below that would be a sign that the lengthy consolidation phase is ending and the broader downtrend is about to resume.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

Gold Futures, 4-Hour Chart Analysis

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 394 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

EOS Update: Preparing for a Big Bullish Move

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EOS has been stuck in a range since August 8, 2018. It’s been trading between $6.65 and $4.50 with a midpoint of $5.30. If you’re a day trader, the range is wide enough to exploit and generate serious profits. However, this is not the case for many retail investors who bought the bottom and are anticipating the next big rally. They’d want to know when EOS (EOS/USD) would make another substantial move.

The good news is we are certain that it’s soon, very likely within a month. The next question would be the direction. This is something we’ll never be 100% certain of. However, we looked at the charts and we’re confident that this move will usher in a new higher high.

In this article, we reveal how this coin is preparing for a big bullish move.

Unnerving Lack of Volatility

EOS has been slowly flatlining since September 2018. The trading range has become tighter and tighter with each passing week. You can see the almost non-existent volatility in the weekly RSI. The indicator has moved within a three-point range (42 – 45) in the last two months.

Weekly RSI range

In addition to the weekly RSI, the daily trading range has been suffocating. The last time Bollinger bands were this tight was about a year ago. It was at the point before EOS launched a massive bull run.

Daily Chart

Before you get excited, we have to be clear that narrow trading ranges do not necessarily foretell a bull run. However, it is a prelude to a big move. It is the proverbial calm before the storm. The storm, we believe, will nourish the bellies of starving bulls.

Alleviating Resistance to Support (RS) Flip

EOS has a diagonal trendline that cuts through both the bull and bear runs. The trendline started to exist on January 20, 2018 when it acted as resistance and prevented the market from going above $15.75. The first RS flip happened on April 24 when EOS breached resistance of $12.00. This helped the market climb to $23.029 on April 29.

The diagonal trendline continued to serve as a support for EOS until June 22 when the market breached support of $9.50. This effectively flipped the support into resistance. EOS worked very hard to take back the diagonal trendline but to no avail. As a result, the market dropped to lows of $4.1778.

Diagonal trendline

The price action described above illustrates the impact of this trendline. It provides massive resistance when the market is below it. On the other hand, it offers firm support when EOS traded above it. Thus, the market would have been in a bad shape now if bulls would not have put up a strong fight. Luckily, they did.

With a series of higher lows, bulls eventually flipped the resistance into support on September 27. They also completed the retest when EOS dropped to $5.0014 on October 11. This tells us that bulls are mobilizing. It looks like they are quietly and patiently accumulating at these levels.

Promising Inverted EOS Chart

If you’re having trouble believing that EOS is starting to look bullish, then allow us to present to you the inverted chart. One look and you’ll know that this chart is prime for massive shorting.

Inverted weekly chart

This inverted chart looks like it already topped out. It tried really hard to take out resistance of $3.50 but it failed again and again. Its inability to breach the resistance led to exhaustion. You can see the rally fading in the declining volume. The market persistently rose even if volume steadily decreased. This is not a sustainable ascent.

As a result, the market appears to have broken down of an ascending triangle pattern. It is currently retesting the resistance but without volume, it is likely that the market will resume its descent. When it does, EOS will make its big move.

Bottom Line

With volatility almost non-existent, EOS appears to be preparing for a massive move. While this is something we are certain of, the direction is still not guaranteed. However, the recent RS flip of the diagonal downtrend and the inverted weekly chart make us believe that EOS is gearing up for a big bullish move.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.7 stars on average, based on 269 rated postsKiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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