The experts are wrong, stocks did not fall on virus headline risk. The indices simply needed a rest. The S&P 500 had one red weekly candle in a long string of mostly green ones.
This by no means constitutes a correction.
The news of the delta variant is immaterial to stock prices for as long as we don’t lock down. Covid-19 killed people but it’s the lockdown that killed businesses. PINS stock has had an official correction, which is more than 10%. It’s a buy-able dip but with caveats.
Pinterest has a lot of fans on Wall Street. The platform gained from having a pandemic last year. When we were out of work and sitting at home, we had time to explore new online things. The fundamental metrics are proof of this. The revenues exploded 10 times in three years.
It is hard to argue with results like these. This automatically makes its stock a worthy investment.
PINS Stock Moves Fast in Both Directions
Technically, the fans fall in and out of love of it too easily. That’s where the opportunity comes from today. It has seen its fair share of action but now it has printed positive candles. The bulls bought the stock off $66 per share with strength. This is also the level that has been in contention since October. Those usually are pivotal, so they make for good support.
The caveat is that the markets in general need to hold up. PINS cannot rally on its own.
Long term, it probably won’t matter much at what exact time investors buy it. Therefore, there is never a rush to buy it all in. Moderation is key so one can manage the risk. Pinterest stock moves fast in both directions. In February and May it fell 35%. Conversely, in January and March it rallied as much and more.
It all started a year ago with a sharp 750% jump from the pandemic crash. It printed the all-time highs in February and has failed twice to match it. That’s a concern for now that will eventually be the mega-catalyst into thin air. First things first, the bulls need to hold the floor this week.
The rally off that was extremely strong. Now they need to focus on holding the May lows. Otherwise the bears could gather momentum to take it 25% below that. I am not raising those alarms with nefarious intent. I’ve been mostly positive on PINS stock over the years.
Stay True to Your Thesis
I am not a perma-bull on PINS stock either. In early April I called for patience and it served us right. Although I didn’t call a perfect top, the stock corrected more than 30% in less than a month. I am not boasting but presenting proof that I simply trade the action in front of me. There is no need to speculate when we have actual data on the charts. Combine that with the fundamentals and we can deploy risk with smarts.
Regardless of how much I like a particular stock, I should be realistic with its situation. The indices are in a precarious condition at all-time highs. The recent shake out is a reminder that bad things happen without warning. This leaves room for sharp and sudden corrections.
Investors usually find solace in that they are in it for the very long term. I contend that they shouldn’t use that as blinders. We’ve never seen this situation before. Central banks and the White House are experimenting with programs of epic magnitudes. something could break at any moment. In hindsight all the experts knew about the 2008 global collapse. Going into it, it was business as usual. Then the financial collapse happened and broke thousands of banks.
Markets Are in Virgin Territory
Moreover, we have never been this high before. Everything on Main Street and Wall Street is more expensive than ever. Inflation reports are also finally showing bloat. Loose monetary conditions will have to end sooner than later. This could pull the rug from under equities. We don’t know how deep the correction will be. We have to be ready for the worst. At the very least, we should be humble in our conviction.
Buying new stock for the long term could work but in small bites. I am not bearish Pinterest stock. My worry is from the macroeconomic situation. Great stocks fall to no fault of their own all the time. Shorting it now is also wrong.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.