The next Fed meeting is in less than a week, the mid-term elections are in less than two weeks, and here we are Thursday, fretting over a social media company that's hell-bent on draining its free cash flow so you can interact in an alternative universe. Yes, the world is losing its mind.
If Microsoft (MSFT) and Alphabet (GOOGL) were Wednesday's hot mess, Meta Platforms (META) is today's dumpster fire. But rather than spend time tearing apart Meta's third-quarter financials because that will be done by a thousand different people today, I'll only note that the company's plummeting free cash flow and soaring expenses are not comforting. The chart below was provided by META's management, and it's easy to see which way free cash flow headed during the most recent quarter.
From a stock perspective, META is broken. We can pull stats like a sub-3X price-to-sales ratio and say with a high degree of certainty that the market has completely lost faith in the company. Or we can look at the stock crashing through recent lows and acknowledge that there isn't much in the way of support to pin our risk management on. Frankly, outside of day timeframe scalpers chasing nickels and dimes, I don't see a reason to devote much attention to this stock until the business fundamentals improve and the stock establishes some base to measure risk against.
Moving on to Invesco QQQ Trust (QQQ) , Wednesday's after-hours collapse in META didn't drag the QQQ lower, so I'm entering this morning's session with an eye toward buying weakness on a break beneath Wednesday's regular session low.
More specifically, we have a volume-weighted average price (VWAP) anchored to the bullish breakout day from Oct. 21 sitting near $277.50, the 21-day exponential moving average (EMA) around $275.75, and the 10-day EMA sitting near $275. Using a wider-than-normal zone of $275 to $277.50, traders who believe we have further to rally in the near term have a fairly set area to monitor for longs.
As far as a cut-bait level is concerned, a close under the VWAP anchored to the Oct. 13 swing low, or $271.50, would clearly indicate that the bears are back in control.
