Meta stock is jumping on earnings, but it’s not out of the woods just yet. Watch this level.
Shares of Meta (MVRS) – Get Meta Report (FB) – Get Meta Platforms Inc. Class A Report are ripping higher on the day, up about 14% so far in Thursday’s session. The rally comes after better-than-expected earnings.
For now, it’s helping give the market a boost ahead of earnings reports from Apple (AAPL) – Get Apple Inc. Report and Amazon (AMZN) – Get Amazon.com, Inc. Report, which are due up after the bell tonight.
As for Meta, it was a mixed quarter but it was not as bad as feared. Earnings slid 17% year over year, but topped analysts’ expectations. User growth did too, although revenue of $27.9 billion missed consensus estimates of $28.3 billion.
Overall, Meta stock had fallen almost 55% from the all-time high to yesterday’s low.
There’s clearly some value here. The stock has been crushed and was left trading at about 14 times this year’s earnings estimate. Even though consensus expectations call for an 11% decline in profit this year, at some point one must argue the fact that that pessimism has been priced in.
Not to mention Meta’s ownership over the world’s most popular social media platforms, a robust balance sheet and strong cash flow.
That all said, does that mean the bottom is in? No, not necessarily.
Trading Meta Stock
Daily chart of Meta stock.
Chart courtesy of TrendSpider.com
The problem with Meta is that its fundamentals are working against it right now. To reiterate, one can argue that there is value in the stock, but they cannot argue that the company is struggling at the moment.
Combine that with a bear market in Meta stock specifically and volatility in the broader market overall — for reference, the Nasdaq is down 22.4% from the highs — and we can’t say that Meta is out of the woods just yet.
To say that, we need to see it reclaim resistance, put in a higher low and begin a new uptrend.
When we look at the chart, Meta stock gapped up into and faded from a tough spot. Since its gap down in February, shares have been trapped in a channel. Shortly after today’s open, it tested the midpoint of this channel.
Additionally, Meta stock ran into the declining 50-day moving average and the 50% retracement of the current range since the gap-down in February. Just above these measures is the 21-day moving average and the daily VWAP measure.
If Meta’s rally is for real, it will clear all of these measures, putting the $230 to $235 zone in play. There it finds the 200-week moving average and channel resistance. However, even if this is resistance, it would give the stock a chance to form a higher support level and potentially begin a new uptrend.
On the downside, losing today’s low increases the likelihood that the stock will go on to fill the gap down to $181.21. If it gets there, the 52-week low will technically be vulnerable, down at $169.
