Facebook, Twitter and the markets

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Feet to fire, I’d be looking for a temporarily range-bound market here for a few days maybe, and then maybe a headfake of a 1%-2% up day in the markets and then after that we’ll have another down whoosh of 3%-5% or so and then I’d look to start scaling into some of our long positions and new trading/investing ideas with some tranche buying.

Indeed, I don’t think this bubble-blowing bull market is over yet, as I could picture the Nasdaq getting close or just above its old 5,000 high from the dot-com bubble in 2000. That’d give the chartists all a big ol “Double-Top” pattern to talk about.

In the Chart of the Day from my column, Where’s the gold, where’s the fear and where are you? on Wednesday, I was not suggesting that the markets are topping out right now and are about to crash like they did in 2000 and 2008. I am just showing how tiny the current pullback has been in the grand scheme of things and that we shouldn’t think seeing a few of our stocks on discount from a few weeks ago is somehow a magical opportunity to load up.

Let’s see what the market brings us though, because it will do what it will do and let the prices and timing of our stocks dictate what trades we make next. Which leads us to Twitter TWTR +3.88% .

This ugly Twitter action is the type of thing that can panic out the momo traders in the broader market too. Patience is what I’ve been preaching so far this year and still am. Elad Ryba said it best “$TWTR down $15. $AKAM up $14. Hit or miss, win or lose. Very tough.”

In this week’s Revolution Investing, called Why we own Facebook and not Twitter, I wrote “I spent a lot of time analyzing and laying out my bullish case for Facebook … but in a nut shell … the reason I own Facebook and not Twitter is because I don’t think Twitter will be able to monetize as well over the next few years because of a lack of innovation and rich-media content.”

Last night’s Twitter earnings report and the lack of traction the company’s site versus the accelerating traction that Facebook’s model is showing, underscores the further details I wrote about in that report too:

“While Twitter was dinking with the colors of their old website, StockTwits and my Scutify website (Cody Willard is the largest shareholder in Scutify‘s parent company, Wall Street All-Stars) and apps have now had a huge running start and are seeing the positive feedback loops of garnering ever more users which brings ever more contributors, which brings ever more users.

“And sites like StockTwits and Scutify have already innovated the ability to let users literally “follow” stocks, and not just other users. And why the headache of having to deal with the old Twitter 140 character limit? We did away with it at Scutify. I’m sure other sites, apps and networks have already far out innovated Twitter for this particular and other demographics.

“Twitter could have and probably someday will try to catch up with us, but notice that I didn’t mention anybody out-innovating Facebook”

There’s an old saying that it’s never a stock market but always a market of stocks. Akamai, Facebook and Google $GOOG have delivered strong growth and in this bubble-blowing bull market, that’s made all the difference, at least for this earnings period. I think that pattern is likely to continue as good reports will be bought and bad reports will be sold. Such action is indeed likely to give us a sideways, range-bound market as I started off theorizing about in the opening paragraph of the column.

Steady as she goes, really, despite and/or because of Twitter disappointing its investors and momo-traders last night. $TWTR $AKAM

Cody Willard writes Revolution Investing for MarketWatch, posts the trades from his personal account at TradingWithCody.com, which is not affiliated with MarketWatch, and is the largest shareholder in Scutify‘s parent company, Wall Street All-Stars. At time of publication, Cody was net long Google and Facebook. Follow Cody on Twitter at twitter.com/codywillard.

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Cody Willard

Founder, CEO & Chairman at Wall Street All-Stars, LLC

Cody Willard is the founder of Wall Street All-Stars and the principal of CL Willard Capital. Cody serves as an adjunct professor at Seton Hall University and writes TradingWithCody.com. He was an anchor on the Fox Business Network, where he was the co-host of the long-time #1-rated show on the network, Fox Business Happy Hour. He wrote a monthly investment column for The Financial Times as well as columns for TheStreet.com and was a regular guest on CNBC’s Kudlow & Company from 2004 to 2006. Cody’s stock picking ideas and economic outlooks have been featured on NBC’s The Tonight Show with Jay Leno, ABC’s 20/20, CBS Evening News, CNBC’s SquawkBox, Jon Stewart’s The Daily Show, as well as in the Financial Times, Wall Street Journal, New York Times, and many other outlets.