Meta Platforms Inc (NASDAQ:FB) has created double bottom and triple bottom patterns on the daily chart.
A double bottom pattern is a reversal indicator that shows a stock has dropped to a key support level, rebounded, back-tested the level as support and is likely to rebound again. It is possible the stock may retest the level as support again creating a triple bottom or even quadruple bottom pattern.
The formation is always identified after a security has dropped in price and is at the bottom of a downtrend, whereas a bearish double top pattern is always found in an uptrend. A spike in volume confirms the double bottom pattern was recognized and subsequent increasing volume may indicate the stock will reverse into an uptrend.
- Aggressive bullish traders may choose to take a position when the stock’s volume spikes after the second retest of the support level. Conservative bullish traders may wait to take a position when the stock’s share price has surpassed the level of the initial rebound — the high before the second bounce from the support level.
- Bearish traders may choose to open a short position if the stock rejects at the level of the first rebound or if the stock falls beneath the key support level it created the double bottom pattern.
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The Meta Chart: Meta formed a double bottom pattern at the $185.82 level on March 14 and March 15 and in reaction, the stock shot up 16.61% higher to reach a high of $216.80 on Friday. On Monday, the stock opened slightly lower and looked to be forming an inside bar pattern on the daily chart.
- The inside bar leans bullish because Meta was trading higher before forming the pattern. Bullish and bearish traders can watch for a break of Friday’s mother bar later on Monday or Tuesday to gauge the future direction.
- The stock has not confirmed it’s trading in a new uptrend pattern because it has not printed a higher low. Bullish traders can watch for a reversal candlestick, such as a doji or hammer, to form over the coming days to indicate a higher low is being formed. This could also offer a solid entry point for traders who are not already in a position.
- The move lower on Monday was on lower-than-average volume, which indicates healthy consolidation is taking place.
- Meta has a gap above between $248 and $316.87, which is about 90% likely to fill at some point in the future.
- The stock has resistance above at $216.15 and $230.31 and support below at $200.69 and $190.14.
