Introduction

Shares of Meta Platforms, the parent company of Facebook and Instagram, may experience further difficulties based on a significant technical indicator. Meta recently fell below its 50-day moving average for the first time since December. This shift represents a departure from the strong upward trend observed in Meta and other major technology stocks over the past eight months.

Background

Meta shares have outperformed this year following CEO Mark Zuckerberg’s announcement of a focus on efficiency and artificial intelligence, resulting in a stock increase of over 145%. However, the current situation sees the shares remaining below the 50-day moving average, which stands at $297.98. Moving averages are closely monitored by market analysts to assess an asset’s momentum. Moving above the moving average typically indicates an uptrend, while falling below suggests the opposite.

Analysis and Outlook

Market expert John Kolovos of Macro Risk Advisors states that breaking the 50-day moving average signifies pressure on the intermediate-term uptrend. However, the absence of a definitive ‘top pattern’ suggests a possible pullback or consolidation phase. The next support level for Meta sits at $252.50, which should hold if the weakness is a routine pullback. Failure to hold this level could result in a further decline to $215, bringing Meta close to its 200-day moving average at around $211.

Carter Worth, founder and CEO of Worth Charting, is monitoring the $265 to $270 level, where the 150-day moving average comes into play. A retracement of 25% from Meta’s recent low to its recent high is expected at this level. Worth suggests selling and shorting at this stage, with plans to cover at $265, followed by a period of observation.

In addition to falling below its 50-day moving average, Meta has also completed a double top formation, as noted by Frank Cappelleri, founder and president of CappThesis. A double top formation occurs when an asset fails to surpass a specific level on two occasions, indicating a bearish chart pattern. While Meta’s strong performance this year makes support zones less apparent, if the company fails to reclaim the area near its moving average, a downside target of $250 is projected, representing a 13% pullback from Tuesday’s close.