Meta Platforms Inc (META)

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Chart Of The Day: Is Beaten Down Meta Platforms Stock Finally A Buy?
By: Investing.com | May 2, 2022

It's been a rough eight months for Meta Platforms (NASDAQ:FB) as the company's stock more than halved in value, losing over 54%, as of last Wednesday's close.

About half of the losses that have been weighing on shares of the Facebook parent company occurred on Feb. 3, when the stock fell 26.4% in a single day, wiping out more than $230 billion in market value. It was the single worst loss of value on record.

The FB selloff was triggered by a dismal quarterly earnings report, which included a number of misses including for profitability, along with news of declining users for the Facebook platform. It was the first time in its history the social media giant showed quarter-on-quarter declines in this crucial metric.

The company's most recent earnings report, on Apr. 27, was a different event entirely. Meta beat EPS expectations, though revenue disappointed. The stock skyrocketed nonetheless, gaining 17.6% in the following session.

User acceleration was especially heartening to investors, easing worries the platform was bleeding, as users defected to TikTok and other, more youth-focused sites.

But does the stock's rebound along with more positive fundamentals suggest a bottom is in?


FB Daily

Shares found support by an uptrend line in play since the December 2018 low. The Apr. 27 trough was 9.5% lower than the Mar. 14 low. Although that sounds like a significant drop, considering the 43.3% dive from the Feb. 2 peak to the Mar. 11 trough, it is a proportionately minor decline. So much so in fact that it could turn out to be an H&S bottom.

However, the broader view, via the weekly chart since 2018, tells a more nuanced story.


FB Weekly 2018-2022

Via this view, it's easier to identify that the rising trendline to which the price returned is flat relative to the advances, setting up the potential for a much larger, upward sloping H&S top.

While the price dipped below the 200-week MA twice, in December 2018 and March 2020, forming two left shoulders, it is the first time trading formed a peak, turning the primary MA into resistance—the first time this has occurred since the company went public on May 18, 2012.

The 50-Week MA is bearing down hard on the 100-Week MA, which is also falling. So, how should a trader proceed amid these developing patterns and crossing trends? Should they take a long position or go short? That decision will depend on their skill level.

Trading Strategies

Conservative traders should wait until either the smaller H&S bottom or the more oversized H&S top complete before making a move.

Moderate traders could risk a buy if the price successfully retests $170 levels or if it bests the $240s.

Aggressive traders would short after the price retreats from Friday's highs, below the 50 DMA, before joining moderate traders. When patterns are still emerging, money management becomes the crucial decision.

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