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As Facebook Hits 1 Billion Users, Why Not to Own the Stock

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For Facebook to be a buy, the supply-and-demand equation needs to show evidence that the buying interest outstrips the supply.

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MINYANVILLE ORIGINAL Now that Facebook (NASDAQ:FB) has revealed it has one billion users, you should focus on the one reason you should still not own the stock -- at least not yet. It's the supply and demand, as evidenced by the charts, that still says that the probabilities favor lower prices. In fact, rather than blathering about Facebook, the focus should be on the social media stocks that are winners, not losers, in the space.

Six weeks back I pointed out that Google (NASDAQ:GOOG) was a buy on any dip when it was $100 cheaper. The same could have been said for a couple others stocks in this space like LinkedIn (NYSE:LNKD) and Pandora (NYSE:P). To see what I mean, just look at this comparison chart since Facebook went public showing the clear delineation between winners and losers.

(Charts courtesy of investools.com.)



For Facebook to be a buy, the supply and demand equation needs to show evidence that the buying interest outstrips the supply. So far it hasn't, although it is starting to become more balanced. Here's a view of supply and demand via the chart.



In this chart, there is a large anchor bar that formed on the second week of August 2010 (highlighted) which evidenced volume swelling to almost 400M shares. Clearly the supply was still greater than the demand at that juncture and that rush to sell finished off the weekly ABCD down projection to $18.97 -- almost to the penny.
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