Social media has served up massive terabytes of useful information and commentary during the virus outbreak, offering a lifeline to millions of anxious users. It's also the biggest test of the digital venue since the World Wide Web came online in the 1990s because it's the first pandemic that can be tracked and discussed in real time. That power has benefits and liabilities because misinformation these days can cost lives.

Facebook, Inc.'s (FB) stock price hasn't benefited in recent weeks, even though it's likely that daily user metrics have gone through the roof as folks all around the world huddle together in the digital space, seeking guidance and comfort. The same story is playing out at Twitter, Inc. (TWTR), which withdrew first quarter 2020 guidance on Monday, joining thousands of U.S. companies affected by the pandemic.

As it turns out, these are highly cyclical issues that depend on advertising income to post healthy quarterly revenues and profits. Those income streams could take heavy hits in the second quarter, with a reduction in expected political ads as well as lower rates driven by the rapid economic contraction. As a result, these issues are moving in tandem with the vast majority of equities, swinging violently while the U.S. infection rates continue to rise.

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Facebook stock carved a long series of higher highs and higher lows between 2014 and the summer of 2018, when the Cambridge Analytica privacy scandal triggered a massive gap and major decline, dropping the stock nearly 44% into December's two-year low. A three-legged advance completed a round trip into the prior high in January 2020, posting an all-time high just five points above the 2018 peak on Jan. 29.

The sell-off into March 18 posted a 39% loss, while the bounce into this week has added about 15 points. This short-term reversal has unfolded at the .786 Fibonacci retracement level, which marks a high-odds turning point, but it's unwise to expect a rapid recovery back to the January high. Price levels at $160 and $175 will mark key obstacles during a recovery wave, while the $180s could yield a final target if the bounce lasts longer than expected to work off oversold technical readings.

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Twitter shares bottomed out in the mid-teens in 2016 after a brutal decline that that started in 2014 in the $70s. The stock built a basing pattern at new support and turned higher in 2017, entering an uptrend that posted a lower high at $47.70 in June 2018. It tested that resistance level in September 2019 and sold off, settling back at support in November. The stock completed a double top breakdown earlier this month, dropping to a two-year low last week.

The breakdown violated the .618 Fibonacci retracement level of the 2017 into 2018 uptrend before tagging the .786 retracement last week. Unfortunately, heavy resistance now lies just a point or two above this morning's opening print, advising bottom fishers and dip buyers to stand aside because that level is unlikely to be breached for more than a few sessions without a downturn in pandemic casualties.

The Bottom Line

Social media use is skyrocketing during the pandemic, but that isn't benefiting shares of Facebook or Twitter, which are highly dependent on advertising revenues that could fall precipitously in coming months.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.