Boris Schlossberg, managing director of FX strategy at BK Asset Management, says there are two factors that are giving rise to these second-generation tech names.
“One, disposable income is probably the best we’ve seen in a decade, so there’s a lot of shopping going on in the Christmas season. Number two, I think Christmas online shopping has really gone mainstream,” Schlossberg told CNBC’s “Trading Nation” on Friday.
Etsy has rallied 40 percent over the past month, and Wayfair has gained 19 percent.
However, Schlossberg expects the big bounce in web 2.0 stocks to fade as markets enter 2019.
“Just as retail brick-and-mortar dies in January and there’s absolutely nothing going on there, I have a feeling these stocks are going to be in for a little bit of a hangover come the beginning of next year as some profit-taking comes in,” Schlossberg explained. “I don’t think a lot of this burst is going to be sustainable as far as the stock price goes.”
Not all analysts are so skeptical of web 2.0 stocks’ run.
Craig Johnson, chief market technician at Piper Jaffray, says two internet stocks — Wayfair and Twilio — could see an even bigger bounce from here.
Wayfair “has just pulled back and retested the uptrend support line that’s been intact since 2016,” Johnson said on “Trading Nation” on Friday. “You can also see that we’re moving back above its 200-day moving average and RSI on that chart never broke below 50. That means that the primary uptrend is still intact and we could see a measured objective on this stock back to $150.”
A move to $150 would mark a 36 percent rally from Wayfair’s closing price on Monday. It is currently trading roughly 5 percent below its 200-day moving average.
“If you look at Twilio, here’s a stock that’s broken out of a huge base. In the recent weakness, it’s pulled back and confirmed support and looks like it’s ready to take another leg higher. From our perspective we can see a move up to $120 on this stock,” added Johnson.
Twilio would need to rally nearly 26 percent before reaching $120. It trades 34 percent above its 200-day moving average.