Meta Platforms’ Decline: How Much Lower Can It Go?
Dr. Arnout ter Schure | Feb 03, 2022 05:12PM ET
With today’s additional 26% plunge in the share price of Meta Platforms (NASDAQ:FB)’s, formerly known as Facebook, it is time to revisit what my Elliott Wave Principle (EWP) work has to say about FB. Keep in mind, FB share price had already lost 25% from its all-time highs by last week.
My last look at FB was almost four months, see here and here. Back then, by using the EWP, I predicted Meta would “drop to the ideal 4th wave target zone between $238-$294 before rallying to new all-time highs one last time.”
And “the ideal target zone remains $294-$238. Or, put simpler $265+/-30. … Once (pink) Cycle wave-1 tops, FB’s shares should be in a multi-year decline back to at least the 2018 lows ($120s), possibly even lower. Price will have to drop below $190 to suggest a much larger top is already in place.”
What has happened during these four months?
Simple, FB is now trading at $238. Bingo, downside target achieved.
Thus, my EWP-based forecast from four months ago was as accurate and reliable as can be. It shows the Elliott Wave is primarily a good forecasting tool for the intermediate to long term, as the shorter time frames are inherently more variable. It is no real surprise because the premise of the EWP is mass psychology, and that phenomenon expresses itself well in the longer time frames. Thus, the logical question is: What’s next?
Figure 1: Meta Platforms monthly candlestick charts with detailed EWP count and technical indicators.
The current drop is quite vicious and appears not over, especially given the technical indicators on the monthly time frame are just turning to a sell, and wanting to see continued lower prices on this time frame. The possible notion that “much larger top is already in place” must be seriously entertained. I have shown both EWP options in Figure 1 above.
Figure 1A shows the EWP count as postulated four months ago. And it is still possible. Whereas Figure 1B shows the option for the dreaded Cycle-1 top. In the latter case, FB will continue to drop for a while, probably to support at around $220+/-5 for a wave-A before a more meaningful B-wave (B is for bounce) counter-trend rally establishes itself. Namely, corrections and bear markets are significant corrections, always comprise at least three waves (A, B, C) and so far, no real counter-trend rally has yet emerged on the monthly chart. Thus, we must anticipate it.
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Regardless, once wave-B tops, wave-C (C is for crash) must take hold and should bring Meta’s share price down to around $130+/-5, possibly as low as $100. However, at this stage, such an assessment looks around multiple corners at once and is thus uncertain, albeit it provides a general road map. Knowing that corrections are much more variable price structures than an impulse, one must be even more patient and open minded. As such, the first focus is on the completion of wave-A, then a target zone for wave-B, which when (close to) complete allows for a more reliable and accurate forecast for wave-C.
Lastly, as I said in my recent update on Netflix (NASDAQ:NFLX), see here: “NFLX is the poster child of what will happen to all the other FANMAG stocks and many others, eventually. Make no mistake. So please stay alert, and please always have a solid exit strategy in place because that will prevent one from sitting through potentially further losses like today.”
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