Explaining Facebook Stock Price Swings

Hi,

I'm a med student and I'm starting to learn about trading stocks with extra money I have. One of my undergrad majors was econ, I've read several books about investing, and I've talked to a few people in the HF world about it. So I have a pretty basic understanding.

I've been looking at Facebook stocks this week and I'm wondering if anyone can explain 2 things that happened.

1) Between last Friday and Monday, the stock jumped from about $22 to $22.71.

2) On Monday, it fell from $22.71 to $21.62 from 9:30 AM to 10 AM.

3) Today, it jumped from $21.97 to $22.73 from 12 noon to 12:40 PM.

Are there predictable reasons that these jumps happened? Here are my thoughts:

1) and 2) After Zuckerberg's appearance, casual investors got too excited over the weekend and got knocked down on Monday.

3) Don't know.

Thanks!

Comments (16)

Sep 19, 2012 - 1:54pm
OptionsShark, what's your opinion? Comment below:

from what you've described there it seems like the norm for FB. If you look even further back than just the last 3 days, you'll notice that FB has a 3-6% intraday swing between the low's and high's pretty much since the thing started trading. Of course there will be outliers where there was a 10%+ change. As for an actual reason, I don't know if you would find one better than just simplying investor emotion.

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Sep 19, 2012 - 2:22pm
BTbanker, what's your opinion? Comment below:

3) The company, in oreder to boost revenue from marketing over wireless devices, is testing a service that places advertisements on mobile applications other than its own.

In Google Finance, you can read the news for the company and match the corresponding letter the the time it was released. You can see how it positively or negatively affects the stock price. All trading is based on market psychology, and many times the change in price does not have good reason behind it.

http://www.google.com/finance?client=ob&q=NASDAQ:FB

Sep 19, 2012 - 3:09pm
UFOinsider, what's your opinion? Comment below:

Large investors buying/selling blocks of shares can push the price a bit as well.

Get busy living
Sep 19, 2012 - 3:26pm
ladubs111, what's your opinion? Comment below:

Also shorter and short squeezes on these sorta of stocks are pretty common which is why you see huge swings. I'd stay away from FB tho. Its a speculation at this pnt and can swing 10-20% in a week in either directions, same with solar companies right now, rimm, and nokia. If you want to learn investing start off properly with a safe company. Wanna learn to be a trader, go ahead and play whit facebook, see how much of the profit you can make, while limiting your losses on the bad days.

Sep 19, 2012 - 5:38pm
WallStreetOasis.com, what's your opinion? Comment below:
ladubs111:
Also shorter and short squeezes on these sorta of stocks are pretty common which is why you see huge swings. I'd stay away from FB tho. Its a speculation at this pnt and can swing 10-20% in a week in either directions, same with solar companies right now, rimm, and nokia. If you want to learn investing start off properly with a safe company. Wanna learn to be a trader, go ahead and play whit facebook, see how much of the profit you can make, while limiting your losses on the bad days.

Don't go long - bought some puts recently. Remember, just because it's dropped a lot doesn't make it "cheap". Apple and Google (near or at all time highs) both trade at significant discounts to FB which is valued ~$37Bn...on what, $1.5bn of earnings? with all the lockups expiring (a lot on Nov 14), stay away for now.

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Sep 19, 2012 - 7:20pm
ladubs111, what's your opinion? Comment below:
WallStreetOasis.com:
ladubs111:
Also shorter and short squeezes on these sorta of stocks are pretty common which is why you see huge swings. I'd stay away from FB tho. Its a speculation at this pnt and can swing 10-20% in a week in either directions, same with solar companies right now, rimm, and nokia. If you want to learn investing start off properly with a safe company. Wanna learn to be a trader, go ahead and play whit facebook, see how much of the profit you can make, while limiting your losses on the bad days.

Don't go long - bought some puts recently. Remember, just because it's dropped a lot doesn't make it "cheap". Apple and Google (near or at all time highs) both trade at significant discounts to FB which is valued ~$37Bn...on what, $1.5bn of earnings? with all the lockups expiring (a lot on Nov 14), stay away for now.

$49 bil at the end of today. FB stock is like a chic on her rags, dunno how it will swing.

Best Response
Sep 19, 2012 - 7:54pm
WallStreetOasis.com, what's your opinion? Comment below:
ladubs111:
WallStreetOasis.com:
ladubs111:
Also shorter and short squeezes on these sorta of stocks are pretty common which is why you see huge swings. I'd stay away from FB tho. Its a speculation at this pnt and can swing 10-20% in a week in either directions, same with solar companies right now, rimm, and nokia. If you want to learn investing start off properly with a safe company. Wanna learn to be a trader, go ahead and play whit facebook, see how much of the profit you can make, while limiting your losses on the bad days.

Don't go long - bought some puts recently. Remember, just because it's dropped a lot doesn't make it "cheap". Apple and Google (near or at all time highs) both trade at significant discounts to FB which is valued ~$37Bn...on what, $1.5bn of earnings? with all the lockups expiring (a lot on Nov 14), stay away for now.

$49 bil at the end of today. FB stock is like a chic on her rags, dunno how it will swing.

was referencing $37bn EV, not market cap

Sep 20, 2012 - 12:45am
mdtrader, what's your opinion? Comment below:

Thank you everybody! That was very helpful. It's also really humbling to see so many intelligent people split on whether a stock will rise or fall... and then you throw casual investors (like me!) into the mix that get betrayed by their own emotion and add another unpredictable element... and all the while you know somebody's programs and algorithms are mechanically crunching away at every movement... this is all so interesting.

Sep 20, 2012 - 8:46am
UFOinsider, what's your opinion? Comment below:
mdtrader:
investors (like me!)
Are you an investor or a trader? If you're INVESTING, sink your money into a blue chip or hire a professional. If you're TRADING....well, don't play with money you can't afford to lose without altering your lifestyle
Get busy living
Sep 24, 2012 - 12:08pm
mdtrader, what's your opinion? Comment below:
UFOinsider:
mdtrader:
investors (like me!)
Are you an investor or a trader? If you're INVESTING, sink your money into a blue chip or hire a professional. If you're TRADING....well, don't play with money you can't afford to lose without altering your lifestyle

Right now I'm trading. I have extra Bar Mitzvah and graduation money that I saved and I can afford to lose all of it because I have my yearly budget covered. So I'm using that for trading. I also have a job and I'm gonna save my money from that for real investing. Thanks for the advice!

Wallstreetoasis.com:
also, for the record, i wouldnt bet against FB long term. I just think it is currently overvalued at $22/sh. I do think once/if it gets into single digits (~$15bn EV)it becomes an interesting long term buy with some nice upside.

Thanks! It's definitely tanking right now (down 9% from Friday's closing, probably after the Barrons downgrade) so I'm keeping an eye on it.

Sep 20, 2012 - 11:27am
WallStreetOasis.com, what's your opinion? Comment below:
mdtrader:
Thank you everybody! That was very helpful. It's also really humbling to see so many intelligent people split on whether a stock will rise or fall... and then you throw casual investors (like me!) into the mix that get betrayed by their own emotion and add another unpredictable element... and all the while you know somebody's programs and algorithms are mechanically crunching away at every movement... this is all so interesting.

also, for the record, i wouldnt bet against FB long term. I just think it is currently overvalued at $22/sh. I do think once/if it gets into single digits (~$15bn EV)it becomes an interesting long term buy with some nice upside.

Sep 20, 2012 - 7:58am
SirTradesaLot, what's your opinion? Comment below:

Honestly, moves that small are just random fluctuations. You don't need news to make moves like that. Also, Facebook sucks and is probably going lower.

Sep 20, 2012 - 8:39am
hermes88, what's your opinion? Comment below:

Hey,

Also important to look at what's happening in the broader market as well, for example if this had happened exactly a week later it could have almost all been explained by the improvement in risk sentimenet due to QE3, and European ESM approval, and a correction of that earlier this week.

In this situation, it was probably random fluctuations.

Yahoo Finance is great to see what possible catalysts are, as it has a Headlines section that will give you relevant news for a particular stock, that way you can figure out whether it was just flows or actual news hitting the tape.

Jul 4, 2022 - 6:31am
bug-me-not, what's your opinion? Comment below:

In today's world, not many people are interested in stock trading and so on. A lot of people like to do cryptocurrency now, because you can make money faster there. But the problem is that speed doesn't mean efficiency, because cryptocurrency has very big risks. You can lose just as quickly and easily as you can make money. That's why I prefer to trade stocks and different currencies. I often analyze Facebook (Meta) shares at https://www.checkman.com/quote/fb , to keep up to date with all the financial developments of this company.

Jul 4, 2022 - 6:32am
SouthSidde, what's your opinion? Comment below:

In the long run buying Facebook stocks will be beneficial, because the stock market will increase.

If you are looking for good stocks right now i would suggest Microsoft (MSFT)

Right now Microsoft (MSFT) is worth $214

Microsoft is trying to acquire Tiktok if they are successful in acquiring it the stock price will increase dramatically making it a good competitor with Facebook, Amazon and other tech companies.

The deal between Microsoft and Tiktok (ByteDance) isn't confirmed but it is risk a stock investor must be willing to take. If the acquisition doesn't go through you can still sell Microsoft stocks for the same price because it is Big Cap stable company

Jul 4, 2022 - 10:32am
Friedmaneconomics, what's your opinion? Comment below:

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