Talking Numbers

Social wars heat up

Social wars heat up

Facebook wants to go from being a distraction at work to being a work tool.

According to a published report in the Financial Times, the social media giant is working on a new project called "Facebook at Work." The website is said to let users connect and collaborate with their business contacts. If true, the move appears to be a direct shot at LinkedIn's core user base, which is comparatively smaller than Facebook but tends to be people looking to leverage their social media contacts for employment purposes.

LinkedIn shares fell 5 percent on the report, which have yet to be confirmed. But the move might be an overreaction, some traderscaution.

"If you look at this business vertical, LinkedIn very solidly owns it," said Gina Sanchez, founder of Chantico Global. "When people think about Facebook, they think of a free-for-all, people who divulge all sorts of things they really shouldn't whereas LinkedIn really is all about cultivating professional contacts."

LinkedIn has a comparative advantage in job listings, growing contacts for salespeople, and developing business opportunities for executives, said Sanchez, a CNBC contributor. "And if you look at LinkedIn, its ad revenues, while growing from a smaller base, are growing much faster than Facebook's," she added. "In this particular vertical, LinkedIn is going to remain dominant."

LinkedIn may dominate Facebook in its stock returns as well, if the chart work of one technician is correct.

"Both charts look attractive on an intermediate-term perspective," said Mark Newton, head of technical analysis at Greywolf Execution Partners. "But the recent surge of momentum on a short-term basis has really helped LinkedIn to start to accelerate. I prefer this one."

Charting the relative share prices of Facebook to LinkedIn (that is, the price of Facebook divided by the price of LinkedIn), Newton sees a recent breakdown in the uptrend Facebook had enjoyed compared with LinkedIn since 2013.

"This supports the view that LinkedIn should perform better in the near-term," hesaid.

Looking at a chart of LinkedIn by itself, Newton is particularly enthused by the stock's performance over the past couple of years. He said shares broke out above a 21-month base of support in early 2013. LinkedIn has not traded below $136 since, and Newton sees it as remaining above an upward-sloping trend line even though it had a large pullback from September 2013 to May 2014.

"The key is that the pullback held a very important area of longer-term trend line support," Newton explained. "It really never did get back into this area of the base where it broke out. That's an important point."

Another positive sign is that LinkedIn had a "bullish gap" last month, Newton said. That occurred on Oct. 31, when the stock's low was $19 higher than the previous day's highs indicating a large amount of bullish sentiment.

"As of last week, it closed at the highest level on a weekly closing basis for the year," Newton remarked. "I think that the stock goes about 10 percent higher and challenges the area right near 2013 highs."

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