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Asset Watch
Tuesday, November 12, 2024
While U.S. stocks soared on the back of a Republican Presidential victory, potential tariffs and trade wars left some companies deep in the red. Moreover, with earnings season still punishing the underperformers, there was plenty of carnage beneath the surface of the S&P 500’s strength.
And with Pinterest one of the major casualties, does the social media giant offer value after the recent sell-off?
While Pinterest shed 14% on Nov. 8 following disappointing Q3 earnings, CEO Bill Ready said during the conference call:
“We are pleased to report monthly active users of 537 million in Q3, another record high, reflecting 11% year-over-year growth. Each quarter of record users provides further evidence that we found our best product market fit in years.”
In addition, “We’ve generated substantial [AI] returns from our investments that have fueled growth across our business…. Our AI models generate over 400 million predictions per second,” which means “while other platforms may see what their users are looking to purchase today, we see what users are interested in purchasing days, weeks and even months in advance.”
Thus, the long-term fundamentals continue to trend in a positive direction.
When zooming out and focusing on the weekly chart, Pinterest has solid support in the $27 to $29 area. The former reflects several highs and lows since 2019, while the latter shows the uptrend from the 2022 lows remains intact (labelled trendline support).
Furthermore, Pinterest hit a weekly low near $27.90 and closed above $29. As a result, while further confirmation is required, it could be a sign that a bottom is forming.
Another bullish development is the divergence of the money flow index (the blue line at the bottom). The technical metric is similar to the RSI, but it includes price and volume in the calculation.
If you analyze the right side of the chart, you can see that the blue line is rising even as the stock price is falling. Consequently, the indicator signals that underlying sentiment is much more bullish than it seems.
Because it’s prudent to wait for confirmation, monitoring Pinterest this week should provide meaningful clues. If the stock holds above $29, you may want to enter near the end of the week to position for a Q4 rally.
If not, price support is near $27, and the rising trendline will continue to adjust higher if Pinterest avoids a breakdown.
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