By any measure, Meta Platforms’ (META) rally these past 15 months has been epic.
After bottoming out in late 2022, the social media and data mining giant gained around 450%. It rallied over 20% in the past month alone.
That recent surge has seen it rejoin just four other stocks with valuations exceeding $1 trillion (Apple, Microsoft, Amazon, and Nvidia).
It is a massive change from early 2022 when META’s stock price was practically in freefall.
Yet after gapping higher off its Q4 earnings beat, META has struggled recently to attract new buying momentum.
So today, I want to check in to see where the stock could be headed from here…
A Steady Climb
On the left side of the chart below, you can see META’s steady climb in the first half of this year.
The steady rise in the 50-day Moving Average (MA, blue line) shows the rise, with the shorter-term 10-day MA bullishly tracking above it:
Meta Platforms (META)
Source: eSignal
Throughout this period, the Relative Strength Index (RSI) also stayed in the upper half of its range (above the green line).
After that strong rally, though, META consolidated from August through to October.
That sideways period shows a change in our technical indicators…
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The 10-day MA converged back to the 50-day MA. They both moved closely together.
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The RSI retraced from overbought territory and zig-zagged across support/resistance (green line).
As the chart shows, META’s rally resumed as it began to make a series of higher highs.
The 50-day MA returned to its uptrend. And the 10-day MA moving further above the 50-day MA shows the acceleration of META’s up move.
Likewise, the RSI has risen into its upper range (apart from a brief dip in December) since META resumed its rally.
Take another look:
Meta Platforms (META)
Source: eSignal
But after gapping higher on February 2 due to its big Q4 earnings beat, META’s rally has run out of steam. It has been unable to break above short-term resistance (upper orange line).
That’s happening while buying momentum has recently been trending lower (lower orange line).
So what can we expect from here?
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A Common Reversal Pattern
We know that this divergence (orange lines) is a common reversal pattern.
When momentum (RSI) falls like this, it will eventually pull the stock lower too.
It’s still early days with this move. But a clear break lower by the RSI toward support could set META up for a quick reversal.
The other thing I’m watching is the MACD…
After flatlining, the blue MACD has recently fallen and crossed beneath the orange Signal line (red circle).
If the MACD line continues to fall and drags the Signal line down with it, then that will add further evidence of any emerging down move.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict