Investors should wait before chasing Meta here, according to the charts
While this week’s earnings announcement from Meta Platforms (META) certainly encourages optimism for this leading growth name, a review of the technical conditions suggests that META still has much to prove for the bulls to declare victory. META has been decidedly rangebound since the first quarter, fluctuating between support in the $430-$440 range and resistance around $520-$540. As we can see on the daily chart, this sideways price action is eerily similar to META’s situation in the second half of 2023. After reaching a peak around $320 in July 2023, META spent four solid months bouncing between price support around $280 and retesting the July peak. Finally, in November 2023, we witnessed an influx of buying power, as investors pushed the stock above $320. A few weeks later, the price pulled back to retest that breakout level, as well as the 50-day moving average, before launching into a three-month rally into Q1 2024. It’s worth noting that in January 2024, overbought conditions on the RSI indicator were actually a bullish sign of sorts for long-term investors, as it suggested a higher likelihood of further gains as upside momentum was building. Only after a bearish momentum divergence in March, with higher price highs yet weaker RSI, did the new uptrend pressure dissipate, and Meta Platforms settled into a new trading range. With this week’s earnings beat, we’ll likely see META test the upper end of this new trading range. But the weekly chart shows just how much downside momentum this leading growth name would need to overcome to breakout of the recent consolidation phase. Here we can see the recent trading range in much better context, but we can also see weakening momentum conditions. Note how the RSI has been trending lower in 2024, even as the price has remained rangebound. The PPO indicator, a classic trend-following tool, has also been sloping downward after registering a sell signal in April. The declining momentum on the weekly chart suggests a serious headwind to META’s attempt to break out of its recent trading range. You may notice a similar configuration in late 2023, but eventually, the weekly PPO generated a bullish signal as the price finally exited the 2023 trading range on route to new all-time highs. This multiple time frame review for META shows striking similarities for trading ranges in 2023 and 2024. The 2023 range was finally eclipsed once we saw an upside break above a clearly defined resistance level. Investors today may be well served by being patient and waiting for a similar breakout before going all in on META. -David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT 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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