One of the star performers this year is Meta Platforms (META).
As a reminder, META owns Facebook, Instagram, and WhatsApp. Since the start of 2024, the social media conglomerate has rallied almost 50% as of its high last week. It is now up a massive 495% from its October 2022 low.
META’s big Q4 earnings beat just over a month ago saw it gain over 20% in a single day.
Since then, META has slowly ground higher. But technical signals are increasingly warning of a potential reversal.
So today I want to check in on META’s chart to see where it could be headed from here…
A Steady Uptrend
On the chart of META below, you can see its steady uptrend until July last year.
Throughout this period, the 10-day Moving Average (MA, red line) bullishly stayed above the longer-term 50-day MA (blue line). Both MAs trended higher.
The chart shows how this up phase coincided with the Relative Strength Index (RSI) moving in the upper half of its range (above the green line).
Meta Platforms (META)
Source: eSignal
But after peaking in July, META went through a consolidation pattern from August through October.
The 10-day MA crossed back below the 50-day MA. And both moved sideways closely together.
The RSI also switched back and forth between its upper and lower range as buying momentum fluctuated.
Then META’s long-term uptrend resumed in October along with several key technical signals…
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The 10-day MA crossed back above the 50-day MA and accelerated higher from early January.
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Buying momentum returned. The RSI tracked predominantly in its upper band.
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After crossing above the zero (0.00) line and meandering sideways, the blue MACD line crossed above the orange Signal line. Both rose higher. You can see the MACD’s sharp rally in February off the back of META’s Q4 earnings jump.
Take another look:
Meta Platforms (META)
Source: eSignal
Yet now things are shifting…
Despite META slowly tracking higher after those Q4 results (upper orange line), the RSI shows that momentum has been waning (lower orange line).
This diverging pattern between the RSI and stock price is a common reversal pattern.
We’re also seeing another diverging pattern from the MACD (against META’s stock price). The blue MACD line crossed beneath the Signal line, and both lines are trending down.
So what should we look for from here?
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An Emerging Down Move
When momentum is steadily falling like this, it becomes increasingly difficult for a stock to hold a level, let alone rally.
The RSI is likely to test support. So what happens next will be key…
If the RSI falls through support and into the lower half of its range, then META’s recent move lower could develop into something bigger.
That would potentially “fill in the gap” from its Q4 earnings announcement on February 2.
The other thing I’ll keep a close watch on is the MACD.
If the MACD line continues to track lower, pulling the Signal line with it, that will add further confirmation to any emerging down move.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
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