Long Trade Idea
Enter your long position between $638.36 (the intra-day high of its last bearish candlestick) and $650.17 (the intra-day low of its post-earnings candlestick).
Market Index Analysis
- Meta Platforms (META) is a member of the NASDAQ 100, the S&P 100, and the S&P 500.
- All three indices are approaching all-time highs with lower volumes, and the sell-off conditions remain intact.
- The Bull Bear Power Indicator of the NASDAQ 100 Index turned bullish, but below its descending trendline.
Market Sentiment Analysis
Equity markets recovered most of their losses, but trading volumes decreased, and do not confirm the uptrend. Opinions about the much-awaited Santa Claus rally differ, as the conditions leading to last month’s sell-off remain. The AI bubble expands amid circular financing and valuations. Consumer sentiment remains a concern, and inflation is sticky as growth is slowing. China’s manufacturing sector unexpectedly contracted, and equity futures point to a severe sell-off at the beginning of December.
Meta Platforms Fundamental Analysis
Meta Platforms is one of the world’s biggest spenders on research & development, a member of the US Big Five Tech Companies, and the Magnificent Seven. It is an industry leader in the metaverse and has now embarked on a hiring spree to become a leader in advanced AI and superintelligence.
So, why am I bullish on META despite its post-earnings correction?
I am bullish on META’s announcement to switch from NVIDIA chips to Alphabet chips, which should decrease costs and boost margins. It adds to its strategic partnership with Arm Holdings to produce energy-efficient data center chips. Valuations are reasonably low for an AI company, and Meta Platforms is a leader in this sector with a forward-looking approach. Ad demand remains strong, generating the required cash to fund its AI ambitions.
Meta Platforms Fundamental Analysis Snapshot
The price-to-earnings (P/E) ratio of 28.66 makes META an inexpensive stock. By comparison, the P/E ratio for the NASDAQ 100 Index is 34.89.
The average analyst price target for META is $841.42. It suggests excellent upside potential and reasonable downside risk.
Meta Platforms Technical Analysis
Today’s META Signal
- The META D1 chart shows price action breaking out above a horizontal support zone.
- It also shows price action approaching its descending 38.2% Fibonacci Retracement Fan level with enough momentum for a breakout.
- The Bull Bear Power Indicator is bullish with an ascending trendline.
- The average bullish trading volumes are higher than the average bearish trading volumes over the past three weeks.
- META failed to match the recovery of the NASDAQ 100 Index, a bearish development, but has accumulated more bullish catalysts.
My Call on Meta Platforms
I am taking a long position in META between $638.36 and $650.17. I am bullish on META due to its strategic partnership with ARM Holdings and its switch from NVIDIA to Alphabet chips, which should improve operating margins.
- META Entry Level: Between $638.36 and $650.17
- META Take Profit: Between $796.25 and $841.42
- META Stop Loss: Between $575.44 and $597.63
- Risk/Reward Ratio: 2.51
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