Chart of the week: a new outlook for rebranded Facebook

1st November 2021 09:31

CEO Mark Zuckerberg has changed Facebook’s name to Meta, but will it resurrect the struggling share price?

Facebook – will the new name Meta fly?

With this leading social media company in the direct firing line from all sides, Mark Zuckerberg has decided to change its name to – Meta (NASDAQ:FB). This has brought widespread derision from the sidelines (I have yet to read a supportive comment!).

It has been pointed out that 'Meta' means 'dead' in Hebrew, and my dictionary definition is 'showing or suggesting an explicit awareness of itself or oneself as a member of its category: cleverly self-referential'. Hmm. Sounds dangerously inward to me.

As some have asked, was this rebrand an attempt to divert attention away from the very negative press it is receiving? And/or is it to try to bolster the falling stock price with a focus on the 'metaverse' concepts?

Yes, the shares are down about 20% off its 1 September high. So was my COTW of July 19 prescient? Then I wrote: “I am venturing into the contrarian world (again) and putting my case that Facebook shares are likely topping and investors who take at least some profits here would be prudent.”

The shares traded then at the $360 region and were still in a major uptrend. Going against a major trend is usually considered financial suicide. But not always.

I pointed out that US president Joe Biden had then stated that Facebook was “killing people with Covid misinformation”, and that very powerful and highly unusual utterance from the 'leader of the free world' would likely be a watershed moment for social media platforms. In addition, the online abuse and death threats continue unabated.

So, is this a case of “What Mr Zuckerberg has created, he will also destroy?”

Here is the weekly chart posted in July:

Past performance is not a guide to future performance

I concluded that the shares were in the final fifth wave up and that the top was nearby given the momentum divergence.

Here is the updated daily chart showing my three trendlines that have been broken:

Past performance is not a guide to future performance

So, is this a 'three strikes and you're out' set-up? Odds are now strong a long-lasting bear trend started on 1 September, and only an unlikely move into a new all-time high could erase that forecast.

But with negative sentiment building, my first major downside target is the $260 region.

John Burford is the author of the definitive text on his trading method, Tramline Trading. He is also a freelance contributor and not a direct employee of interactive investor.

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