Meta Platforms Inc (NASDAQ:META) gapped up about 4% higher on Wednesday and continued to spike intraday, trading up over 6% in the afternoon.
The move higher, caused by news that Meta planned to reduce its workforce by about 13%, allowed the stock to regain the eight-day exponential moving average, which is a good sign for the bulls.
Meta CEO Mark Zuckerberg wrote a letter to employees of the company, according to an SEC filing, explaining that he had been wrong about his prediction that growth would continue to accelerate after the end of the COVID-19 pandemic.
“Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I'd expected. I got this wrong, and I take responsibility for that,” Zuckerberg said, according to a report.
The workforce reduction, paired with a hiring freeze Meta will impose through to the end of the first quarter of 2023, provides a better chance for Meta to increase its earnings over the next two quarters.
Meta plunged over 23% on Oct. 26, when the company printed a third-quarter EPS miss, reporting earnings per share of $1.64 compared to the analyst estimate of $1.91.
Read more on Meta’s Q3 earnings here
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The Meta Chart: Meta negated a long-term downtrend on Wednesday when the stock printed a higher high above the most recent lower high, which was formed on Nov. 1 at $97.49. In order for the stock to confirm a new uptrend on the daily chart, Meta will eventually need to retrace to print a higher low above the Nov. 4 all-time low of $88.09.
- Technical traders may have seen Meta’s bounce on the horizon because between Oct. 27 and Nov. 7, the stock’s relative strength index (RSI) was measuring below 30%. When a stock’s RSI drops under that level, it becomes oversold, which can be a buy signal for technical traders.
- The retracement, at least to print a higher low, may come on Thursday because Meta was working to print a shooting star candlestick on the daily chart. A shooting star candlestick is often found at the top of a trend, but the candle is a lagging indicator that requires a subsequent candle to be printed for confirmation.
- Meta has resistance above at $114.77 and $122.53 and support below at $102.50 and $88.41.
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