Meta stock: Buy signal or bear market ahead?

In recent weeks, investors have been rushing to European stocks, particularly those supplying the European war machine, as the EU has announced a massive €1,700 spending per capita to rearm Europe. This shift has led to significant discounts in Meta, which is currently down 22% from its all-time high and graced its 200-day moving average at $572.

Typical, a touch of this moving average tends to result in good entry points for investors, while a breach of it could mark the start of a steeper down move.

Why is Meta down?

There are several reasons for this slowdown. First, it follows profit-taking after the AI boom of recent years, during which Meta's stock surged 725% from its 2023 low – and reinvesting the proceeds into European stocks, where Germany, the biggest economy, is expected to massively invest, leading to higher growth.

Second, the ongoing trade wars in the US are not helping the situation. If the US government wanted to continue the trade wars, then tech companies could come into the crosshairs of rival nations.

However, Trump and his administration usually back away when the situation turns hot. We saw this with the first and second rounds of tariffs on Mexico and Canada, where the US offered concessions quickly.

In the case of Elon Musk, who managed to upset not only locals with the cuts in the US government but also Europeans with his involvement in the German election and his less thought-out hand gestures, forced the President to host a Tesla promotion day at the White House.

The key message is that Trump and his government have had enough stock market slides and will probably wait out the next few weeks and months to see how the stock and economic data develop. This could provide respite to Meta stock.

On earnings, Meta has consistently beaten expectations since April 2023. In its latest report, revenue reached $48.38 billion, far exceeding the $28.64 billion recorded in Q1 2023. Earnings also rose to $8.02 billion from $2.2 billion over the same period. The next earnings call is scheduled for Wednesday, 23 April.

The technical outlook is appealing

For Tesla, today's level of around $583 per share aligns with historical patterns, and the current 22% decline is typical of a bull market correction. Traders who expect the bull market to continue and believe Trump won't disrupt it are likely bullish at current levels.

Historically, more aggressive 38-43% sell-offs have occurred even in bull markets. If that happens, prices could drop to around $400-$450, another 22% decline from today's levels. Around these levels, we also find the lows from April and July 2024; the overall trend will remain upwards above these levels. Failure to hold this level could send the stock to the psychological level of $300.

The strategy is straightforward. Those betting on a market recovery will likely be bullish from current levels and might even look to add more at $450 per share and remain bullish as long as the price trades above $400. While those who experience more pain in the short term will turn bullish in the $400 - $500 range.

Is this a good opportunity to buy the dip, or is this the start of a bear market?

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