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Lock-Up Expiration Could Signal Bottom for Facebook

The Facebook faithful have been all but confounded by the stock’s action over the past several months.

Before the Facebook IPO some pros including Anthony Scaramucci of SkyBridge Capital thought shares would double in short order.

But they didn’t.

In fact, questions about the company’s ability to generate profit thwarted bulls with the sell-off slashing shares by about 50% since late May.

And lately the price action has gotten even worse. Over the past several weeks, the stock has been stuck in the mud, with investors fearing an imminent lock-up expiration will drag shares even lower.

Facebook will free up nearly 1.7 billion shares – four times the number now trading – starting mid-August as provisions that had barred employees from selling their holdings begin to expire.

However, the stock may be near a bottom.

"Watch how the stock reacts as the flood of shares come onto the market," says trader Josh Brown, author of The Reformed Broker blog. What happens next, he says, is a classic ‘tell.’

“If Facebook doesn’t get rocked below 20 – it may be an all clear sign. It may be ok to own into the 4th quarter,” he says on CNBC’s Fast Money Halftime Report.

Many pros, including OptionMonster Jon Najarian and famed pundit Henry Blodget have told us in the past that $20 was key. At that level, they say Facebook is more fairly valued.

"It’s been a long time since I’ve had anything positive to say about FB,” adds Brown “But there’s no question in my mind that FB will be a dominant Internet company for a long time to come. If you’ve been looking to get in, and the stock holds $20, this may be the opportunity.”

Posted by CNBC's Lee Brodie

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Trader disclosure: On August 10, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long INTC; Pete Najarian is long YHOO; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Pete Najarian is long FIO; Pete Najarian is long UPL CALLS; Josh Brown is long AAPL; Josh Brown is long JPM; Josh Brown is long WFC; Josh Brown is long GDX; Josh Brown is long GLD; Josh Brown is long XLU; Josh Brown is long XLF; Josh Brown is long WMT; Josh Brown is long TG; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MO; Steve Grasso is long NVIV; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long XLU

For Brian Nagel
A member of the household of an Oppenheimer & Co. Inc. research analyst who covers this company has a long position in JCP.

For Matt Fruhan
Nothing to Disclose

For Brian Wieser
Pivotal Research Group LLC is an independent equity research company and is neither a broker dealer nor offers investment banking services. Pivotal Research Group LLC is not a market maker for any securities, does not hold any securities positions, and does not seek compensation for investment banking services. The analyst preparing this report does not own any securities of the subject company and does not receive any compensation directly or indirectly from investment banking services

For Steve Weiss
Steve Weiss is short JCP

For Mike Murphy
Mike Murphy is long MANU



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