Social Slide: Social Media ETF Flirts With Bear Market

Momentum stocks giveth and taketh away. Previously beloved “momo” names from industries such as biotechnology, Internet and social media have been doing a lot more taking than giving in recent weeks.

Pain inflicted by the theme of momentum lost is abundantly clear with the previously high-flying Global X Social Media Index ETF (NasdaqGM: SOCL). Barring a stunning late day reversal, one that appears unlikely to happen, SOCL will close lower for the 17th time in the past 21 sessions. Assuming Friday’s loss of around 3% holds, SOCL will be down 17% in the past month, putting the ETF within spitting distance of the 20% loss necessary to define a bear market. [Momentum ETFs Lose Some Mojo]

Speaking of securities that undergone substantial corrections in recent weeks, SOCL has been dragged lower by its largest holding, China’s Tencent Holdings. The stock, more than 13% of the ETF’s weight, is down more than 16% in the past month. [Tencent Punishes These ETFs]

Weakness in shares of Tencent, Facebook (NasdaqGS: FB) and Twitter (NYSE: TWTR), among others, has SOCL trading at its lowest levels since late November 2013. For the adventurous, the ETF’s obvious oversold condition could be a sign SOCL will soon rebound.

“After establishing a new closing all time high of 22.81 on March 6, SOCL has been in a downtrend.  It was only a few sessions after the high that it broke a 1 year trend-line.   Now nearly a month from its high, it is down nearly 18%.  The momentum behind the selling can be seen on the chart in its ADX. It now possesses an RSI below 30 indicating it is becoming oversold,” said Street One Financial Market Technician Dave Chojnacki  to ETF Trends.

Still, it cannot be ignored that none of SOCL’s top-10 holdings that trade on major U.S. exchanges have risen in the past month, and some, namely Yelp (NYSE: YELP) and Pandora (NYSE: P), have suffered catastrophic losses. Those two stocks, a combined 10.5% of SOCL’s weight, are down 7% and 8%, respectively, Friday and those losses will extend the one-month slides for both stocks north of 30%. [Tough Day for Social Media ETF]