Editor’s note: Last year, investors forgot that losses are a normal part of investing. They’ve had to remember it in 2022. You can use a few specific tools to protect yourself, though… And they’re crucial in today’s volatile market. Today, we’re sharing one from our corporate affiliate Chaikin Analytics…
Anybody who thought the metaverse would be paradise just got a rude awakening…
On February 3, metaverse pioneer Meta Platforms (FB) plunged 26%. It was the social media stock’s biggest one-day drop ever – even worse than the 19% decline it suffered in July 2018.
Meta released a bad earnings report. Even worse, it projected weaker-than-expected revenue growth in the next quarter. And its Facebook platform suffered its first-ever membership decline.
Stock implosions happen. But while the metaverse’s central idea – augmenting reality with virtual spaces – might sound far-fetched, Meta is a tech titan. A lot of folks got burned on this one… and never saw it coming.
After more than 30 years in finance, I’ve learned that there are two kinds of investors: those who’ve endured and learned from Meta-like pain… and those who haven’t.
So today, let’s get ahead of the metaverse’s next collapse. To do that, we must consider what you can do to minimize your exposure to this sort of trouble in the future…
Let’s start with Meta’s price chart, as well as some of the most important components at the heart of the Power Gauge system that powers Chaikin Analytics. Take a look…
We’ll go from the bottom to the top for this breakdown. The visual setup is simple… For the Power Gauge’s components under the price chart, green is good, red is bad, and yellow is in the middle.
The panel at the bottom shows our Power Gauge’s overall ranking for Meta over the past year. It’s “neutral” now… But notice the change from green (“bullish”) to yellow in September. We’ll come back to that.
Next up is Meta’s relative strength compared with the SPDR S&P 500 Fund (SPY) – the exchange-traded fund that tracks the benchmark index. This panel shows whether the stock is beating SPY (green) or lagging it (red).
This is extremely important… Wall Street always has a reason for doing what it does. That’s true whether we approve or not – or whether we can figure out the reason at all. If a stock is underperforming the benchmark index, that’s a bad sign.
Now, notice that this band has been red since late September – and in a big way, too. It’s a longer, bolder stretch than the tiny, tentative bit of red last spring (near the left edge).
The timing of the …….