Since February, Meta Platforms has been trending slightly higher due to weaker price momentum. This week, the tech giant’s stock broke below its 50-day moving average as it sold off as investors questioned Meta’s upside potential amid excessive spending on artificial intelligence. This backdrop provides an opportune time to review META’s declining momentum conditions. We will also share the key levels to watch in the coming days to determine if this week’s lower gap is just the start of a longer decline. Since the beginning of 2023, META has experienced a period of remarkably positive price momentum. I have highlighted the RSI in green, which shows how the indicator often became overbought in rally phases – and rarely broke below the 40 level on pullbacks. In bullish market trends, the entire range of the RSI tends to go up, confirming that the momentum is quite constructive overall. Compare that green shaded area to the refreshed area in 2022, where the RSI often reached the oversold level on price declines and rarely broke above the 60 level on rallies. In a long-term downward trend, the entire range of the RSI tends to move downward, indicating a lack of purchasing power to reverse the bearish pressure. META has been trending slightly higher since February, but the RSI has been sloping downward. This ‘bearish momentum divergence’ often occurs at the end of a bullish phase, indicating that the purchasing power that pushed prices higher is now beginning to dissipate. Now let’s focus on this week’s price action. Thursday’s initial lower gap fell to META right in the middle of the price gap that emerged in early February. Gaps often serve as support and resistance going forward, so I would see a move back above $450 as a bullish short-term development. This would indicate that the initial reaction to the first quarter earnings was overdone, and investors see value in buying META stock at a 10-15% discount to recent levels. However, a break below support around $405 would indicate additional waves of selling pressure and a likely test of the 61.8% retracement level around $375. This would also mean a retest of the 200-day moving average, which META has not touched since February 2023. Sudden moves related to profits are not uncommon. The good news is that the technical analysis toolkit includes tools such as Fibonacci Retracements, price differentials and moving averages to help us identify potential support and resistance levels. The bad news for META is that the picture of weakening momentum is starting to look more like long-term bearish trends than bullish trends. —David Keller, CMT marketmisbehavior.com DISCLOSURE: none. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO PURCHASE SECURITIES OR OTHER FINANCIAL ASSETS. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT THE UNIQUE PERSONAL CIRCUMSTANCES OF ANY INDIVIDUAL. THE ABOVE CONTENT MAY NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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Here’s where Meta stock could go after the post-earnings sell-off, according to the charts
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