Meta Platforms: Retest February Gap Near $400 Likely (NASDAQ: META)

I admit, my 2023 Sell notes on Metaplatforms, Inc. (NASDAQ:META) are some of the worst performance ideas I've suggested on Seeking Alpha. I completely underestimated the web rebound advertising sales within the company, alongside still decent growth in the number of users and social media users in general. Of course, the Metaverse's expenses remain outrageous and are unlikely to be recouped by shareholders.

Today I want to focus only on the Meta chart model. I hope you can consider my technical analysis before purchasing any stocks. To me, several indicators predict a retest of its February price gap from $400. If my research proves correct, we could be about to see a -15% to -20% decline for the stock in the coming months (from $474 currently), perhaps to its moving average on 200 days around $380.

At this point, a reset and rebalancing of stock supply/demand (bullish/bearish investor sentiment) could create a better entry level for further purchases. This would even provide a much stronger valuation proposition, with a P/E closer to 20x estimated earnings for 2024-2025.

Let me explain the business environment and my predictions for an immediate correction in the Meta stock price.

The April sale was the real deal

I know bullish Meta investors don't want to hear it. But April sales based on slightly weaker forecasts for the year were supported by an unusual decline in purchasing volumes, overwhelmed by aggressive selling. It's actually the kind of action seen after many stock market highs in the volatile tech sector over several decades. I talked about a similar dump in Advanced microsystems (AMD) in early April here. Since this article was published, AMD has struggled and sold off, despite plenty of positive fundamental news regarding growing demand for its AI chip inventions.

Specifically for Meta, its relative strength peaks against the S&P 500 (SPY) in early April (circled in green below) and the important On the volume of the balance February's positive price gap indicator from the Q4 2023 earnings release (circled in blue) is worth considering in its own right.

The flipside of the good news buying frenzy of early February was the absence of forecasts (on higher capital spending for AI and metaverse development in 2024), as well as an event of massive liquidation of investors a few weeks ago at the end of April. Since then, Price has not been able to trade above its 50-day moving average (blue line).

The price decline in April actually presented the largest bearish reading (red arrow) over 14 days. Ease of movement indicator on Meta history. The EMV calculation essentially takes into account the volume necessary to change the price. The conclusion from April is that there was a complete vacuum of buyers and/or significantly more sellers buying liquidity over 14 trading days (approximately 3 weeks). This event was rare and very unhealthy from a technical perspective if you are bullish on Meta in the short term.

Moreover, something of a head and shoulders The chart pattern has been described (assuming the 50-day moving average is not broken sharply higher in early June). I have drawn two S's and the H in red below, to highlight this formation.

My trading conclusion is price decline in an area around the 200 day moving average (red line), closing the gap in early February makes sense for nowcasting (green box). This would generate a -15% to -20% decline from $474 at the May 29, 2024 close.

In an example of déjà vu, it looks like we're repeating pretty much the same late 2021 high pattern in Meta. Below, I've drawn a 25-month chart of the stock between December 2020 and January 2023. Notice the September 2021 reversal below its 50-day moving average, with intense selling pressure represented by ultra-calculations. weeks of ease of movement over 14 days.

Final Thoughts

Combine the problematic individual meta-graph with an AI-powered advance by big tech over the past year and a half, becoming more exhausted by the day, and it's not hard to imagine that a price drop could be next.

If you are looking to buy Meta stock, I would wait for lower quotes. I know Meta investors have made exceptional gains over the 2023-2024 period, but Seeking Alpha's computer ranking formulas still put an “F”. Quantitative valuation note on stocks. This means that a considerable decline, beyond my forecast of -20%, is entirely possible in recession and/or stock market crash scenarios.

Due to my technical trading research and exorbitant valuations, I will continue my Sell note for meta-platforms, at least until the $400 price gap from February 1, 2024 is closed.

Thanks for reading. Please consider this article as a first step in your due diligence process. It is recommended to consult a registered and experienced investment advisor before entering into any transaction.