Embattled social media giant Facebook will be facing its moment of truth on Tuesday as CEO Mark Zuckerberg heads to Capitol Hill to begin two days of testimony after a massive data scandal.
As investors wait to hear what Zuckerberg will say, one technician says the stock charts are only pointing to more pain.
Facebook is down 19 percent from its recent high, just shy of the 20 percent drawdown that constitutes a bear market.
Since Facebook’s 2012 IPO, there have been seven other instances when its shares fell so much. According to Carter Worth of Cornerstone Macro, despite those drawdowns of 20 percent or more peak-to-trough, the stock was not only able to recover but was also able to stay within a clearly defined uptrend channel.
“The issue here is, are we at risk for breaking the lower band of the channel that the stock has lived in its entire public existence? I think so.” Worth said Monday on CNBC’s “Fast Money.”
Worth illustrated that Facebook’s stock has not only been struggling on an absolute basis, but on a relative basis as well.
“We know that even as [Facebook] stock was going higher, its relative performance [to the S&P 500] started to stall, and now it’s broken [below] trend,” Worth said.
Since the scandal broke on March 17, Facebook shares have tumbled nearly 15 percent, while the S&P is down only 5 percent.
Worth noted that Facebook has not only underperformed the broad market, but also the S&P 500 Consumer Discretionary and Tech sectors.
Facebook stock’s weakness is not a reflection of how the tech sector more broadly has performed lately, according to Worth.
“Not only has tech stayed in an uptrend, its relative performance [to the broader market] has stayed in an uptrend. Facebook’s problems are idiosyncratic. I think it’s highly unlikely that this is a dip to be bought. In fact, I would suggest there’s more downside,” Worth added.
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