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3 Social Media Stocks To Trade On Technicals Today

social media stocks - 3 Social Media Stocks To Trade On Technicals Today

Source: Shutterstock

Is the tech correction over? It’s hard to say. But when considering companies within this tightknit sector, there are social media stocks whose price charts showing strong signals for both bullish and bearish investors. Of course, only one of the two groups can be right about a given stock, meaning there’s serious potential here for enterprising traders.

A confirmed retracement of 13% over 13 days. That’s the downward spiral the Nasdaq Composite has seen in price and duration the past couple weeks. After leading the broader averages up more than 80% from the Covid-19 bear market bottom back in March, gaining nearly 35% on the year and rallying to record-breaking highs, is it enough? Maybe.

The fact is, most corrections don’t grow into full-blown bear markets. The VIX or “fear index,” has also signaled investors aren’t resting confidently on their gains. Panicked highs of 38% reached during the decline are historically in line with meaningful bottoms.

But that’s not to say it’s a one-way street for bullish investors. One worry is the end of the sell-off still has bearish seasonality to move past. September and October are historically weak months.

Another concern? The massive disconnect between a still-struggling Main Street and a market supported by a handful of stocks like Apple (NASDAQ:AAPL) or Tesla (NASDAQ:TSLA) and unparalleled help from the Fed.

Also, while a meaningful bottom is guaranteed at some point, without a historically bulletproof market-based follow-through day in place, bulls aren’t out of the woods.

Here are 3 social media stocks to trade now:

  • Facebook (NASDAQ:FB)
  • Pinterest (NYSE:PINS)
  • Snap (NYSE:SNAP)

To be sure, there’s compelling arguments for bullish and bearish camps. There’s no need for promoting fake news. And some investors may respectively choose to wait for a more definitive victor before voting with their money. Still, others may want to connect with profits today as bulls and bears make their points heard loud and clear in our stock picks today.

Social Media Stocks to Trade: Facebook (FB)

Facebook (FB) monthly bearish top hinting of downside risks
Source: Charts by TradingView

The first of our social media stocks to trade is Facebook, and it’s a short. Bullish investors are trying to unify and influence the daily price chart, but the price chart is showing a bearish monthly topping pattern that has our attention for positioning.

September’s confirmed reversal candlestick follows a significant rally in FB which largely mirrored the depth of the stock’s 2018 to 2020 corrective base. The gains support the idea a topping candle could lead to a more bearish cycle in shares.

Net net, with stochastics also warning an overbought condition has run out of gas, Facebook looks like a social media stock to short today. I’m favoring the November $245 / $230 put spread as a limited and reduced risk way to position.

Pinterest (PINS)

Pinterest (PINS) messy, bullish handle breakout
Source: Charts by TradingView

The next of our social media stocks to trade is Pinterest. Unlike Facebook, PINS is shaping up as a stock to buy. And for more than a couple good reasons too, as the provided weekly chart fully supports.

Technically, Pinterest is demonstrating relative and absolute pattern strength. Considering the broader market’s weakness, it’s certainly bullish. But it gets better too.

The price action also has shares breaking out to new highs from a loose ‘high’ handle consolidation pattern built around the prior highs of a larger corrective base formed over the past year.

Bottom-line, this social media stock has already put in the necessary corrective work to emerge as new leadership. And it’s proving that point right here, right now. Still, without the broader market’s full cooperation, playing this one a bit tighter and buying the October $42 / $45 call looks about right.

Snap (SNAP)

Snap (SNAP) weekly handle consolidation shaping up for breakout
Source: Charts by TradingView

The last of today’s social media stocks to trade is Snap. Like peer PINS, shares of SNAP have carved out a larger corrective cup-shaped base. The stock has also demonstrated relative and absolute strength in recent days.

Unlike Pinterest, a well-constructed handle consolidation stationed between the 62% and 76% retracement levels hasn’t triggered a breakout. For the time being, SNAP should be on investors’ radars for purchasing.

Our best guess is it may take a market-based FTD to confirm a breakout from the handle pattern and an actual buy decision. That could happen in the next couple days. Should things play out that way, the November $28 / $33 call vertical looks to fit in nicely with the price chart and a more actively-engaged stock market suitable for bulls.

On the date of publication, Chris Tyler holds, directly or indirectly, positions in Pinterest (PINS) and its derivatives, but no other securities mentioned in this article.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100%  the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

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