Meta Platforms Technical Outlook: A Checkered Flag? Stock Seems Set Up For Continued Run

The big story on Wall Street on Wednesday afternoon has been Facebook’s parent, Meta Platform’s META, bullish Q1 earnings report. In after-hours trading, META was last up almost 12% to $233.92. By the time stock traders read this piece, most will surely be aware of Meta’s Q1 results and the big pop in the stock. A very quick recap is as follows – earnings beat, revenue beat, raised Q2 guidance, and the first sales increase in a year. 

What is likely more valuable, however, is a little bit of technical analysis and psychology related to the future price-action of META in the wake of Wednesday’s results. Heading into this report, the stock had been rallying throughout the year, climbing nearly 70% after a disastrous 2022. 

What we can deduce definitively is that there has been a relative mismatch between supply and demand in META shares for quite some time. Seems like a simple statement, but it is, in fact, the most important thing that any trader needs to know about this name. Now, the company’s Q1 earnings results have come out and provided another catalyst to add fuel to the fire in terms of the obvious supply/demand imbalance in META. 

The market reacted as would be expected given this set of circumstances – the Q1 earnings ignited a massive rally in the stock in Wednesday’s after-hours. There are two other key factors that traders should take note of with regard to Meta Platforms and its attractiveness as a long position. First, big-cap tech is absolutely rocking and rolling thus far in 2023 – once again. Let me provide some 2023 performance metrics for the usual suspects. 

Netflix NFLX - +9% 

Apple AAPL - +31%

Amazon AMZN - +22%

Alphabet GOOG - +16%

Microsoft MSFT - +23% 

Nvidia NVDA -  +88% 

These stocks run together and momentum in one often feeds momentum in the others. The move in META is likely to be an extended rally for a number of other reasons. First, consider the amount of passive buying that will need to take place at different times in ETFs and funds that track market-capitalized indices. 

As META goes higher, its market capitalization weight – which is already enormous – goes up with it, hence more passive buying and higher prices. Also, there are a good number of money managers and funds in the world that simply cannot get the juice they are looking for in terms of risk in anything but large and mega-cap stocks. They simply run too much money. 

If you need to put billions and billions to work, you cannot do that in the vast majority of U.S. stocks. But, META, with its well over $600 billion market cap can absorb a tremendous amount of money, and as a result, attracts inflows from traders and money managers that are using it not only for investment purposes but also as a proxy for big-cap tech, internet, and the NASDAQ as a whole.  

The final piece to the puzzle here is the chart. In terms of near-term overhead resistance, there is none. Although META is well-off all-time highs and there are a number of resistance levels the stock would have to break through to get back to those old highs, the price could run a good deal before those levels come into play again. In the wake of Wednesday’s big rally in the after-hours, META will have taken out an ascending overhead trendline and pushed well above its nearest moving average, the 20-day sma. 

In conclusion, the underlying supply/demand fundamentals are saying “go,” the underlying business fundamentals are saying “go,” market sentiment in META is saying “go,” and the technical picture is also flashing green. 

Featured photo by Solen Feyissa on Unsplash