Talking Numbers

Here’s what’s wrong with Facebook and Twitter

Here's what's wrong with Facebook and Twitter

Investors have been making friends again with social media stocks. Well, at least they were on Wednesday.

After a tough month, Facebook, Twitter, LinkedIn and Zynga were Wednesday afternoon. Helping the social media sector were buy recommendations by Susquehanna and SunTrust on Facebook, while LinkedIn got an upgrade from Topeka Capital.

(Read: )

So, is now the time to get into the Global X Social Media ETF, the SOCL, which tracks the major social media companies?

CNBC contributor Gina Sanchez, founder of Chantico Global, believes the 16 percent drop in the SOCL over the past month was due to a revision by the market in its valuation of social media stocks.

"A lot of these companies showed some good revenues," Sanchez said. "Everybody got really excited and basically paid more for future revenues. That became a problem. The whole space became overvalued."

Yet another reason Sanchez believes the SOCL dropped is because of China. A quarter of the SOCL is based in China, with Tencent and Sina alone comprising more than 20 percent of the entire ETF. In recent days, the Chinese government has been censoring posts on Sina's Weibo and other Chinese social media sites about protests in southern China.

"That actually drove down social media," said Sanchez. "That happens periodically and you can expect that to continue to happen in China. A lot of China Internet stocks and China Internet ETFs have actually taken a tumble."

Nonetheless, Sanchez sees the main story for the SOCL as being valuations. "As it settles back down, revenues are coming in," said Sanchez. "We'll see how this goes."

(See: CNBC's Social Media coverage)

Steven Pytlar, chief equity strategist at Prime Executions, sees the SOCL as hitting an important support level between $18 and $18.50.

"What the charts are telling us is a more cautious outlook going forward," said Pytlar. "Overall, we still have signals that a downtrend is in effect."

That signal, according to Pytlar, is the falling 10-day moving average on the SOCL.

"Price has been guided lower by the 10-day moving average," said Pytlar, who sees the average as overhead resistance for the ETF. "So, we would be looking for $18 to hold."

Pytlar doesn't see a bounce should the ETF hit $18, at least not for a while. "Ideally, a sideways correction would start to develop rather than ongoing selling here," said Pytlar. "But, overall, not a lot to get excited about. Definitely, would be cautious going forward on this ETF."

To see the full discussion on the SOCL , with Sanchez on the fundamentals and Pytlar on the technicals, watch the video above.

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