Time to Buy the Facebook Bounce?

Stocks snapped back to begin the new trading week.

The Dow posted a gain of 669 points to finish the day higher by more than 2.8%. But the Nasdaq stole the show, reversing its Friday slide to notch a gain of more than 3.2%

After teetering on the edge of disaster last week, the tech trade is alive and kicking. Even stodgy dot-com grandpa Microsoft (NASDAQ:MSFT) enjoyed a banner day. Thanks to a generous analyst upgrade touting a potential trillion-dollar valuation, Microsoft shares surged nearly 8%.

What a ride!

We’re not in 2017 anymore, Dorothy. Volatility is working both ways in this market and keeping everyone guessing. Investor sentiment is spinning almost as quickly as the averages. Traders are shaking off last week’s terrible performance and buying stocks left and right as we sprint toward the end of the first quarter.

There’s only one problem…

Facebook (NASDAQ:FB) wasn’t invited to the party.

Bad news continues to pile up for Facebook as the FTC announced bright and early Monday morning that it was investigating the social network’s privacy practices. Investors immediately dumped their shares, cratering the stock close to nine-month lows.

While the rest of the market was ripping higher, Facebook stock was mired deep in the red.

Poor Zuck…


But it doesn’t stop there. Numerous privacy groups are filing complaints related to the Cambridge Analytica scandal, CBS reports, including a group of 37 state attroneys general that are demanding Facebook reveal its data protection practices.

No, nothing’s going right for Facebook these days. But that’s not stopping the knife-catchers from trying to grab shares on the cheap.

After yesterday morning’s crash, traders breathed new life into Facebook stock. Shares bottomed out just before lunch, sparking a buying frenzy that pushed Facebook back into the green.

Yesterday’s whipsaw action has some traders licking their chops. If the market continues to recover, can the Facebook bounce hold?


Sure, alert traders might squeeze a couple of points out of this Facebook rally. But we’re going to steer clear of any bottom fishing for now.

As I told you last week, this Facebook story is just too important to ignore. Facebook has a public relations problem that won’t just go away anytime soon. A series of management missteps over the past few months have turned America’s favorite social media platform to Public Enemy No. 1.

You can easily spot the change in sentiment by simply pulling up a few Facebook headiness from your favorite news site. Instead of the financial press tripping over itself to revel in Facebook’s rocketing share price, we’re now seeing how-to articles describing steps you need to take to delete your account to make sure Zuckerberg can’t get his paws on your precious personal data.

Sure, hating on Facebook is nothing new. But that hatred is now going mainstream. This negative Facebook news cycle is far from over. Each new development has a good chance to impact shares — whether we’re talking new privacy concerns, user engagement, or top management testifying before Congress.

This scandal probably isn’t the end of Facebook. After all, Facebook isn’t a vulnerable tech startup trying to find its way in the world as a public company. It’s a money-making machine. It will weather the storm eventually. But it’s recovery will probably take a lot longer than a couple of weeks to play out. When it does flash a strong buy signal, we’ll be ready…


Greg Guenthner

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Greg Guenthner, CMT, is the editor of Rude Awakening PRO and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing for 13 years. In 2018, Greg’s Rude Awakening PRO portfolio beat the S&P 500 by 14%.

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