Social media stocks like Facebook Inc (NASDAQ:FB), LinkedIn Corp (NYSE:LNKD) and Yelp Inc (NYSE:YELP) were all crushed yesterday. Early today, the fall continued to the point where they had all dropped at least 10%, some approaching 20% from their recent all time highs. All of a sudden, these stocks staged a mid day reversal and are now hovering around the flat line.
The big question must be asked, is this a major turn around or will they collapse lower. To understand the answer, you must understand human psychology and charting. First, many investors missed the massive run-ups in Facebook, LinkedIn and Yelp. Emotion and annoyance at missing the trade will have them ready to buy on any correction of 10% or more. This happened as investors helped turn the stocks around today. There will be more upside to come in the next few days. However, be warned, the insanely heavy volume and massive drop these stocks have endured means bounces are now selling opportunities. Wide range chart candles with heavy volume are overall bearish.
To summarize: The stocks will likely bounce up a little in the coming days. However, over the next few weeks and months, expect further downside. Cheers!