Shares of Meta Platforms (NASDAQ:) fell Wednesday, closing -0.95%, after falling from an initial gain of 1.00%.
The rapid decline followed the publication of a Wall Street Journal report detailing how Facebook executives attempted to meddle in politics in an effort to stir up further discord between Democrats and Republicans, following Congressional revelations about the company's practices by whistleblower Frances Haugen.
Her testimony revealed in extreme detail the negative influence of the social media platform in several areas. Facebook's meddling was an attempt to avoid stricter regulations in the space, which was then discussed by US lawmakers.
This isn't the first time negative publicity has put pressure on the shares of the social media giant. But in this case, it is noteworthy that a similar reversal occurred during Tuesday's session, when shares closed flat after gaining 1.89% intraday, with no apparent reason for the reversal. On Monday, FB shares shot up, closing 3.26% higher.
Was Tuesday's slump motivated by informed money acting on a rumor before the actual news was published?
Maybe, but maybe not. The technical map helps identify the most likely reasons for Tuesday's moves.
The chart shows that Tuesday's sharp reversal occurred when the price hit the resistance of a trendline since September 27. Also note that the same trendline – from which the shares sold on Wednesday – is the neckline of an H&S
The arrival of the 200 DMAs for the first time since March underlines the sensitivity of this price pressure point on the chart as market forces battle for the direction of the trend.
Note how the price found resistance this week just below the previous rising channel, underscoring the battle for control between bulls and bears. If the resistance continues, bears will have taken over after bulls push prices up from the March 2020 low along the green channel. Should that happen, the price will resume its downward trajectory along the bearish channel.
The 50 DMA came in just below 200 DMA this month, for the first time since the 2020 bottom. On the other hand, the 50 DMA has recovered; if it wins the 200 DMA it will be a bearish failure.
The MACD, which continues to rise, is a lagging indicator. That's why yesterday's sell-off hasn't impacted it yet, as has the momentum-based leading indicator, the RSI. However, we see the same pattern with the RSI. Therefore, if the price offers an upward breakout, the momentum will also increase. a new low, below $299.50, recorded Dec. 3. An upward breakout would occur if the price closed above $363 followed by a return move that retests the neckline support.
Average traders would buy an upward breakout, with a close above $360 and a buying dip to follow.
Aggressive traders can go short as the price approaches the neckline, or go long on a return to the short-term uptrend since the December 3 low. A trading plan will determine success or failure. Here are a few examples:
Trading Example #1 – Aggressive Short Position
Entry: $352
Stop Loss: $353
Risk: $1
Goal: $342
Reward: $10
Risk Reward Ratio: 1:10
Trade Example #2 – Aggressive Long Setup
Input: $335
Stop Loss: $334
Risk: $1
Goal: $345
Reward: $10
Risk Reward Ratio: 1:10
