Bear Bounce in META May Push Further before Downtrend Continues
מעודכן
Primary Chart: Daily Time Frame, 8-D and 21-D EMAs, Long-Term Fibonacci Levels (Retracements of META's Entire Range), Uptrend from Nov. 4, 2022 Low
SUMMARY:
META began its decline much earlier than the broader indices. It peaked at an ATH on September 1, 2021, while 
SPX peaked on January 4, 2022. It has appeared to lead indices by a few months in this bear market. The long-term uptrend line from 2012 more than a decade ago was decisively broken in early 2022. This suggests that it may take a while for META to begin carving out a new uptrend line at a less steep angle based on whatever bear-market lows are formed—whether that be the November 4, 2022 low or a (likely) new low in 2023.
Supplementary Chart A: Monthly Chart of META with Decade-Long Upward Trendline
The bear-market downtrend lines are shown on Supplementary Chart B. The pink line on the Primary Chart reflects the primary-degree of trend since the all-time high in mid-2022. That line has not been broken, and price remains well below it. The dark-blue line is a shorter trendline that lasts for most of 2022. It was broken to the upside in early December 2022. This is no surprise. Steeper trendlines are less sustainable, and often end up being replaced by their less steep counterparts. The break of the dark-blue line is not an end to the bear market, but it does signal a short-term shift that coincides with the sideways to higher corrective rally taking place.
Supplementary Chart B: Trendlines within META's Current Bear Market
In this bear market, META made its most recent low on November 4, 2022. An uptrend drawn from that low is drawn (pink line on Primary Chart above). META's short-term EMAs show that it has been rallying in earnest since this November 4 low. Note the slope of the 8-D EMA and the 21-D EMA. While these are simple indicators, sometimes their simplicity can cause some to miss the power of their message—indicating the short-term trend. The short-term trend remains positive, with price finding support at these EMAs. When price falls below the 21-D EMA, it quickly rises to reclaim it. See Primary Chart.
The Bollinger Bands also reflect the upward rally, which should be deemed corrective until proven otherwise. The Bollinger Bands are widening at the mouth, and when price pushes through the bands to exhaustion levels (set at 2 standard deviations on this daily chart), it falls back but quickly pushes back into the bands. Yes, the CPI could end this prematurely, but technical analysis suggests this stock has further to run before it resumes its longer-term downtrend.
Supplementary Chart C: Bollinger Bands
Similar to the Bollinger Bands, the Donchian Channels also reflect an increase in volatility to the upside. Price is pushing new multi-month highs, which is easily seen using this indicator. As the upper band of the Donchian presses higher with price touching it, that reflects new 21-trading-day highs. But a quick glance at the chart below shows that the highs exceed all highs since late October lows. The October 2022 highs are the ones that will likely be taken out next if the rally continues.
Supplementary Chart D: Donchian Channels
Major support lies at $112, and $115-$116. In addition, the upward TL can easily be used as an invalidation level for any short-term bullish trades. It can also be used as confirmation for any shorts that wish to enter when the bounce exhausts.
Targets are based on the measured-move concept and Fibonacci proportions. Target 1 is $142. That is the 150-day SMA. Target 2 is $149. This level is the measured move area where wave A (or wave W) equals wave C (or wave Y) from the lows. Target 3 is $157-$158. Target 3 is a confluence of levels including (i) the 1.272 extension of first leg of this rally projected from the start of the second leg, (ii) the .618 retracement of META's entire price range going back to the start of data on the chart, and (iii) the 200-day SMA based on today's date, which lies at $158.
The bounce idea is invalidated if price falls below $112-$116. It may also be invalidated (depending on several factors) if price breaks below the pink uptrend line from November 4, 2022 lows.
Lastly, to quickly and effortlessly see the major support (supply zone) for the current corrective rally, see the blue rectangle below. Breaking this level should signal the next leg lower is underway in the primary-degree downtrend.
Supplementary Chart E: Support / Supply Zone
Thanks for reading, and Happy New Year! May your trades and risk-management work out very well this year.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
SUMMARY:
- META remains in a severe downtrend since its all-time high in September 2021. The primary-degree trendline remains unbroken and in effect. A shorter down trendline for most of 2022 has been broken coinciding with its recent upside price action.
- META is experiencing a corrective rally, also known as a bear bounce (until proven otherwise).
- Bollinger Bands support the idea of further upside with the mouth of the bands expanding, and price walking the bands to the upside. The Donchian Channels also show that price is reaching multi-month highs, and its 21-period range is expanding as price pushes higher.
- Target 1 lies at $142. Target 2 is $149. Target 3 is $157-$158. Each target requires that price reach and hold the prior target on a daily close. Each target is a condition precedent for the next target's viability.
- Invalidation levels include the uptrend line from November 4, 2022 lows as well as major support levels at $112 (key structural low), $115-$116 (volume profile).
META began its decline much earlier than the broader indices. It peaked at an ATH on September 1, 2021, while SPX peaked on January 4, 2022. It has appeared to lead indices by a few months in this bear market. The long-term uptrend line from 2012 more than a decade ago was decisively broken in early 2022. This suggests that it may take a while for META to begin carving out a new uptrend line at a less steep angle based on whatever bear-market lows are formed—whether that be the November 4, 2022 low or a (likely) new low in 2023.Supplementary Chart A: Monthly Chart of META with Decade-Long Upward Trendline
The bear-market downtrend lines are shown on Supplementary Chart B. The pink line on the Primary Chart reflects the primary-degree of trend since the all-time high in mid-2022. That line has not been broken, and price remains well below it. The dark-blue line is a shorter trendline that lasts for most of 2022. It was broken to the upside in early December 2022. This is no surprise. Steeper trendlines are less sustainable, and often end up being replaced by their less steep counterparts. The break of the dark-blue line is not an end to the bear market, but it does signal a short-term shift that coincides with the sideways to higher corrective rally taking place.
Supplementary Chart B: Trendlines within META's Current Bear Market
In this bear market, META made its most recent low on November 4, 2022. An uptrend drawn from that low is drawn (pink line on Primary Chart above). META's short-term EMAs show that it has been rallying in earnest since this November 4 low. Note the slope of the 8-D EMA and the 21-D EMA. While these are simple indicators, sometimes their simplicity can cause some to miss the power of their message—indicating the short-term trend. The short-term trend remains positive, with price finding support at these EMAs. When price falls below the 21-D EMA, it quickly rises to reclaim it. See Primary Chart.
The Bollinger Bands also reflect the upward rally, which should be deemed corrective until proven otherwise. The Bollinger Bands are widening at the mouth, and when price pushes through the bands to exhaustion levels (set at 2 standard deviations on this daily chart), it falls back but quickly pushes back into the bands. Yes, the CPI could end this prematurely, but technical analysis suggests this stock has further to run before it resumes its longer-term downtrend.
Supplementary Chart C: Bollinger Bands
Similar to the Bollinger Bands, the Donchian Channels also reflect an increase in volatility to the upside. Price is pushing new multi-month highs, which is easily seen using this indicator. As the upper band of the Donchian presses higher with price touching it, that reflects new 21-trading-day highs. But a quick glance at the chart below shows that the highs exceed all highs since late October lows. The October 2022 highs are the ones that will likely be taken out next if the rally continues.
Supplementary Chart D: Donchian Channels
Major support lies at $112, and $115-$116. In addition, the upward TL can easily be used as an invalidation level for any short-term bullish trades. It can also be used as confirmation for any shorts that wish to enter when the bounce exhausts.
Targets are based on the measured-move concept and Fibonacci proportions. Target 1 is $142. That is the 150-day SMA. Target 2 is $149. This level is the measured move area where wave A (or wave W) equals wave C (or wave Y) from the lows. Target 3 is $157-$158. Target 3 is a confluence of levels including (i) the 1.272 extension of first leg of this rally projected from the start of the second leg, (ii) the .618 retracement of META's entire price range going back to the start of data on the chart, and (iii) the 200-day SMA based on today's date, which lies at $158.
The bounce idea is invalidated if price falls below $112-$116. It may also be invalidated (depending on several factors) if price breaks below the pink uptrend line from November 4, 2022 lows.
Lastly, to quickly and effortlessly see the major support (supply zone) for the current corrective rally, see the blue rectangle below. Breaking this level should signal the next leg lower is underway in the primary-degree downtrend.
Supplementary Chart E: Support / Supply Zone
Thanks for reading, and Happy New Year! May your trades and risk-management work out very well this year.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
הערה
Interestingly, META is holding its own despite all the selling in SPX on fresh recession worries (from bad macro data). SquishTrade is not calling for new all-time highs here, or a new longer-term uptrend at the primary degree. Just some further upside based on the way price is behaving. It's holding an uptrend line quite well. With the unexpected selling in indices yesterday and today, META hasn't even fallen below its 8-day EMAהערה
On January 10, 2023, META closed at 132.99. Target 1 at that time was $142.Target 1 was reached today for a 7.7% move up since the date of this analysis. The intraday high was 143.27. If trading long here, tightening stops would be highly recommended.
עסקה סגורה: היעד הושג
Both targets 1 and 2 have been reached and exceeded. (Target 1 was at $142. Target 2 was at $149.)When this post was published, META had closed at $132.99. It has risen 15.1% since then. Target 3 is aggressive at $157-$159 but it is also the measured move area. That's possible, but at this point, anyone in a long trade should tighten stops.
While this analysis has worked out nicely, it has given traders few proper points of entry from a R/R standpoint. The stock, like many of last year's beaten down names, has squeezed higher quite fast.
הערה
This rally continues to work well. Past all original targets.
SquishTrade
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