Meta – The Sequel

After all the discussion in yesterday’s note about the beauty of the Fibonacci sequence and ratios, all that was left was to analyze the chart and propose a possible trade. Meta however had other plans, gapping up at the open and running nearly 7%. I have an updated chart below that shows the Fibonacci ratios continue to play a role.

It looked yesterday at the close to be a great set up with price finishing just under the top of a resistance zone and the 50% retracement. A perfect set up to buy on a move over the 50% and put a stop at the bottom of the resistance zone. Like I said, it had other ideas. The gap up open made it look like chasing to get involved on this timeframe. The 38.2% retracement level did stop the stock price and knock it back on the initial morning thrust. In all the price action still looks positive though, just a bit extended.

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But if you take this opportunity to reframe the view from a wider perspective there is still a plan to watch. Below is a transformation of the initial chart to a weekly chart of the stock price. This reveals a potential longer term opportunity. The Fibonacci levels remain, but notice the series of lower highs and higher lows, creating a symmetrical triangle. A break of this pattern can lead to a powerful move in the direction of the prior trend, which was up from the 2022 low.

The trigger here would be a break above the falling trend line. Lets call it over 676 to also clear that 38.2% Fibonacci level. For a longer perspective a longer trade is also more appropriate. I like buying a September Call as the driver of gaining long exposure. The 700 strike is offered at roughly $47 as I write. The cost of that exposure can be reduced by selling the July 24 Expiry 700 Call which was bid at about $15. I like July 24 Expiry because it is prior to the earnings report. This sets up a bet that the price will not close above 700 two weeks from today.

If it does keep rising there are adjustments that can be made, like buying back the July 24 Expiry Call by selling a longer dated call and using the proceeds from that sale. Even better, if it expires worthless, you can sell another short dated call to further lower your basis.

The investor that would love to own Meta if it were to drop to 600 following earnings could also sell the July 31 Expiry 600 Call for about $13 to further lower the basis. I will be adding a starter position in the Call Calendar today.