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Meta Platforms' Miss Sends Technical Analysts Scurrying Back to Their Charts

The plunge in the shares of Facebook's parent is reason for a reassessment for how the stock is trending.
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Everyone in the investing world is busy with Meta Platforms Inc. FB here on Thursday. Quantitative analysts are plugging in new numbers. Fundamental analysts are deciding whether to cut price targets and/or ratings. Securities analysts in all the sell side firms are probably reading research notes ahead of the opening. And humble technical analysts are redrawing trend lines. I have said on Real Money a number of times that no investment approach is perfect and this is a great example.

We looked at the chart of FB on Jan. 4 and things were positive. We wrote, "Traders long FB could raise stops to $315 from $311. Add to longs above $353. $387 and then $411 are our price targets now." Traders following my recommendation should have exited the long side earlier this month. Let's check the charts again.  

In this daily bar chart of FB, below, we can see the price action only through Wednesday's close. We have to imagine a pre-market price in the $253 area. Prices could open near the bottom of this chart as it is currently presented. Prices had already stopped at the declining 50-day moving average line and below the cresting 200-day moving average line. The trading volume has been heavier than normal since early November and perhaps some shrewd analysts or traders were reducing their long exposure. The On-Balance-Volume (OBV) line certainly shows a steep decline from November, telling us that sellers of FB were more aggressive. The Moving Average Convergence Divergence (MACD) oscillator turned bearish in early January.  

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In this weekly Japanese candlestick chart of FB, below, we now have to view the price action of the past year as a top formation. The 40-week average line is cresting. Prices are likely to gap lower Thursday and challenge/test the lows of early 2021 in the $255 area. When this chart is updated at the end of the week we expect to see a long red candle pattern. The weekly OBV line turned down in early September and the MACD oscillator is bearish. 

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In this weekly Point and Figure chart of FB, below, we can see a potential downside price target in the $228 area. 

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Bottom line strategy: Today is going to be a high-volume session for FB trading. Prices may or may not bounce after the first 90 minutes of trading and there is always a risk of a lower opening and a continued slide. Journalists will be writing stories about the size of the losses but that will not be useful to making a decision on what the average trader should do. Hopefully you are not exposed and can focus on other issues.

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