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5 Tech Stocks in Danger of Shorting Out

FB, YELP and others are facing growing selling pressures

By Anthony Mirhaydari, InvestorPlace Market Strategist

http://invstplc.com/1ohe1Cr

Stocks were on the slide Tuesday as nervousness grew over the start of Q2 earnings season when Alcoa (AA) reports after the close, as well as the outbreak of another geopolitical hotspot as Israel gears up for an anti-terror campaign in the Gaza Strip.

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With Iraq still a mess and Iranian nuclear negotiations on the fritz, the Middle East is really heating up. And let’s not forget that Ukraine is far from resolved as well.

Technically, the Dow Jones Industrial Average has been pushed back below the 17,000 level that had the bulls foaming at the mouth over the weekend while the Russell 2000 is down another 1.6% as I write for its worst two-day drop since April.

Given all the pent-up selling pressure, the drop could deepen much further.

Certainly, the weakness is already hitting momentum favorites in the technology sector. Here are five popular tech stocks that you need to sell or avoid.

Tech Stocks Under Pressure – Pandora (P)

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Pandora (P), the Internet radio company, has been hammered during the past two days by nearly 14% as it scythes below its 50-day moving average for the first time since March.

Pandora shares enjoyed a nice 36% rally off of their May low as they partially reversed the March-May tech sector wipeout. But the 200-day moving average proved to be tough resistance as investors doubt the company’s prospects amid tougher competition from Apple (AAPL) and others.

Tech Stocks Under Pressure – Twitter (TWTR)

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Twitter (TWTR) shares are down nearly 12% to cap a four-day loss as faith in the microblogging service is shaken. We’ve yet to see Twitter make a profit, with positive earnings per share not expected until the fourth quarter of this year.

Competitive threats are on the rise as well, with Chinese microblogging service Weibo (WB) recently coming public on the Nasdaq exchange.

Tech Stocks Under Pressure – Yelp (YELP)

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Yelp (YELP) dropped hard below both its 20-day and 200-day moving averages on Tuesday after enjoying a huge 45% rally off of its May low. Shares still are down more than 32% from their March high, however, as the bloom has come off the stock.

Like Twitter, Yelp isn’t profitable and isn’t expected to post positive earnings per share for a full fiscal year until 2015.

Tech Stocks Under Pressure – LinkedIn (LNKD)

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LinkedIn (LNKD) has had a rough time since last September, falling into a relentless downtrend that’s pushed the stock down roughly 40% from its old highs. LNKD shares caught a reprieve over the last three months but succumbed to selling pressure again on Tuesday as shares drop below their 50-day moving average once more.

Analysts at Barclays Capital, in a recent coverage initiation note, highlighted the main problem LNKD faces: creating habitual, regular use among its users.

Tech Stocks Under Pressure – Facebook (FB)

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Like many of the other names in its industry, Facebook (FB) suffered a washout between March and May as momentum tech favorites were washed out in a wave of selling pressure. In the months that followed, the bulls wrestled prices higher.

But on Tuesday, that three-month uptrend was decisively broken as FB stock threatened its 50-day moving average for the first time since March.

The shine is coming off of FB as teens, the arbiters of cool in the mobile economy, migrate to other platforms to avoid the “mom problem”: Studies cited by Barclays analysts show Facebook usage by the 35- to 54-year-old age bracket has grown by 41% over the last three years while the 13-17 demo has dropped 25% and the 18-24 demo has dropped modestly.

In response, I’ve recommended the July $62.50 put options to my Edge Pro subscribers.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters, as well as Mirhaydari Capital Management, a registered investment advisory firm.


Article printed from InvestorPlace Media, https://investorplace.com/2014/07/5-tech-stocks-to-sell-short/.

©2017 InvestorPlace Media, LLC