Potential signal:
- I am a buyer of META at $620, with a stop at $595, and a target of $650.
- Meta opened with a sharp gap below $600 before stabilizing near the 61.8% Fibonacci retracement.
- A recovery above $620 could shift sentiment toward value positioning despite concerns about overcrowded AI trades and heavy recent corporate spending.
Meta gapped lower to kick off the trading session on Tuesday to break below the $600 level and then continued to fall at the beginning of the session. However, we've seen a turnaround, and it looks like we may try to recover here. It does make a certain amount of sense, considering that the market has fallen off a cliff over the last couple of weeks and we are now at the crucial 61.8% Fibonacci retracement level. If the market can recapture the $620 level, I will probably start buying at that point, as Meta will be looked at as a potential value play.
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Earnings Weren’t Great, But…
While the latest earnings call wasn't exactly stellar, it did come with a lot of caveats, so I don't know that it's something that you can read too much into. There are some concerns out there about the AI bubble, but really at this point in time, I think what people are starting to worry about is that the AI trade and the technology trade are so overcrowded. And of course, Meta is a big part of that for most passive funds.
They have issued about $81 billion in AI-related debt with Amazon, Alphabet, Microsoft, and Oracle in the last two and a half months. So, it's worth noting that there is a lot of spending going on. Naturally, the question is whether or not it pays off. It may be a situation where a lot of this AI spending takes quite some time to pay off, and that could be part of the problem here.
Nonetheless, if we can break above that $620 level, I am going to start buying.