Social media stocks are sinking.
Though the industry finds itself at the heart of the GameStop-Reddit frenzy as day traders take to social media platforms to express their market views, shares of underlying stocks Twitter and Facebook were unable to stave of broader market pressure on Friday.
Twitter fell 2% during the trading session — though it ended the week with a 5% gain — and Facebook lost 2.5%, down 6% total for the week.
Both appear to have more room to fall, Craig Johnson, senior technical research analyst at Piper Sandler, told CNBC’s “Trading Nation” on Friday.
“I think a lot of the good news is priced into this,” he said. “When I look at the big move you’ve had in Twitter, I think you’ve come right up and you’re now retesting this uptrend support line on the chart going all the way back to … March.”
“I’d probably be fading the stock here in the short term. I think you’ll find a better entry point,” Johnson said, chalking the stock’s recent gains up to a “relief rally.”
Facebook could see a fairly significant drop if it breaches one key level, the technical analyst said.
“This is another one of these social media stocks that’s sort of struggling at its 50[-day moving average],”Johnson said, pointing to its chart.
“If it starts breaking below its 200-day moving average, which is around 252, you don’t have a lot of support until about 223,” he said. “You’re starting to see some of these social media platforms coming under pressure from a chart perspective, and from a trading perspective, I would wait for these stocks to come into lower levels before I step up and buy them.”
Facebook shares closed at $258.33 on Friday. A decline to $223 would imply roughly 14% downside.
Boris Schlossberg, managing director of FX strategy at BK Asset Management, only had eyes for one name in the space.
“Twitter, to me, is the Cadillac or the Mercedes Benz … of financial information. Even though a lot of people have a hard time with it, I think overall, Twitter is just the premium source of all sorts of financial and news information” in the social realm, he said in the same “Trading Nation” interview.
“To me, Twitter is probably the single best long-term buy when it comes to social media platforms because of the quality of its content and the quality of its product,” he said. “The Facebook story … is much weaker.”
The potential for regulatory oversight is also more relevant to Facebook than it is to Twitter, Schlossberg said.
“You have a lot more toxicity that happens on Facebook than you do on Twitter,” he said. “So, to me, from every perspective, fundamental as well as technical, Twitter is a superior play here, even though, of course, Facebook is a much bigger, more profitable business at this point.”