Asset Watch
Tuesday, October 29, 2024
The Big Tech bonanza kicks off this week, with Alphabet, Microsoft, Meta Platforms, Amazon, and Apple all reporting earnings. And with these stocks (plus NVIDIA) making up a huge chunk of the S&P 500, their results could amplify volatility in the days ahead.
Moreover, with Meta Platforms becoming an investor favourite over the last several months, have the correction risks intensified leading up to the Oct. 30 print?
Updating clients on Oct. 25, Bank of America analysts reiterated their $630 price target and said, “We expect a 3Q beat with continued ROI improvements driving strong advertiser share gains.”
However, they added, “While we expect positive estimate revisions post-print, expectations for a beat and higher estimates are high, and management could try to keep ’25 estimates in check (via commentary on headwinds, investments, or conservatism in 4Q revenue outlook), adding some near-term volatility risk.”
In other words, if management’s guidance is solid but not superb, a ‘sell the news’ event could unfold on Oct. 30.
From Meta Platforms’ crash in 2022 to the epic comeback in 2023-2024, some meaningful trends emerged. If you analyze the movement of the blue and yellow lines on the left side of the chart, you can see that the 10 and 20-week moving averages combined to create strong resistance en route to new lows.
But, after a breakout in late 2022, both levels became strong support on the right side of the chart as a new uptrend was born. As a result, the areas near $550 and $530 are vital to keeping the medium-term uptrend intact.
A troubling development that deserves monitoring is the bearish divergence on the right side of the chart. The white trendlines at the top and bottom show how while Meta Platforms’ price has made a higher high, its weekly RSI has made a lower high.
The contrast signals weakening momentum, and often precedes pullbacks.
Some traders may look to stay long with Meta Platforms when it trades above the 20-week MA. The key level has been a solid trend indicator for several years and there is enough data to signal its significance.
Therefore, with earnings and election volatility likely to dominate the headlines over the next two weeks, if Meta Platforms can hold the 20-week MA, the strength should further increase the bulls’ confidence.