Here's where Meta shares could go from here after their post-earnings sell-off, according to the charts

Published Thu, Apr 25 202412:38 PM EDT

Since February, Meta Platforms has been trending slightly higher on weaker price momentum. This week, the tech giant's stock broke below its 50-day moving average, as it sold off with investors questioning Meta's upside potential amid excessive spending on artificial intelligence. This backdrop provides an opportune time to review META's declining momentum conditions. We'll also share key levels to watch in the coming days to determine whether this week's gap lower is just the beginning of a more prolonged decline. Since early 2023, META has experienced a period of remarkably positive price momentum. I've highlighted the RSI in green, showing how the indicator often became overbought in rally phases — and rarely broke below the 40 level on pullbacks. In bullish market trends, the entire range of the RSI tends to move higher, confirming that the momentum overall is quite constructive. Compare that green-shaded area to the redone in 2022, where RSI often touched the oversold level on price drops and rarely broke above the 60 level on rallies. In a long-term downtrend, the entire range of the RSI tends to move lower, signaling a lack of buying power to reverse the bearish pressures. META has been trending slightly higher since February, yet the RSI has been sloping downwards. This "bearish momentum divergence" often occurs at the end of a bullish phase, suggesting that the buying power that has been pushing prices higher is now beginning to dissipate. Now let's focus in on this week's price action. Thursday's initial gap lower dropped META right into the middle of the price gap formed in early February. Gaps often serve as support and resistance going forward, so I would see a move back above $450 as a bullish short-term development. This would indicate that the initial reaction to Q1 earnings was overplayed, and investors are seeing value in buying META shares at a 10-15% discount to recent levels. A break below support around $405, however, would indicate additional waves of selling pressure and a likely test of the 61.8% retracement level around $375. This would also mean a retest of the 200-day moving average, which META has not touched since February 2023. Sudden moves related to earnings are not uncommon. The good news is the technical analysis toolkit includes tools like Fibonacci Retracements, price gaps, and moving averages to help us identify potential support and resistance levels. The bad news for META is that the weakening momentum picture is beginning to look more similar to long-term bearish trends than bullish ones. —David Keller, CMT marketmisbehavior.com DISCLOSURES: none. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.