Besides the biotech sector, 2013-14 proved to be very favorable to social media as SOCL, the social media ETF, rose almost 100% from trough to peak. On its final push higher in March of 2014, it created negative divergence which warned of a possible reversal, a correction at a minimum. After losing 30% in that correction, price has ping-ponged for almost a year creating a sloppy looking symmetrical triangle. Triangles aren’t my favorite pattern to invest off of but the breakout last week had enough constructive indicator support to convince me this break has some legs. In the upper pane the RSI is moving higher and is above 50. In the volume pane just under price, you can see we had an all-time volume week on the breakout which is the type of confirmation we would like to be present. Below volume the MACD has crossed over and continues to push moving higher, and just now crossing the zero line allowing for a lot more upside potential. In the bottom pane which is the performance of this ETF as compared to the SP500 you can see the ratio bottomed and is, once again pointing higher making this a more attractive investment as compared to the index. While fundamentals aren’t something I put too much emphasis on short term, the stocks that make up this ETF such as Twitter, Facebook and Linkedin have the potential to be big long term winners. When all the moon and stars are lining up like they are here, this is definitely worthy of consideration, depending upon your risk tolerance.
