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The Power of Monthly Charts in Technical Analysis


In my technical analysis and moving averages lessons, I typically show daily charts.

But sometimes it pays to pull back and look at longer time frames, like the monthly.

This is especially true in a bear market, when daily charts can be full of noise without a clear trend.

Let's dissect the bust in Meta (META), which is down over 65% from its post-Pandemic highs, using a monthly chart.

Positions Disclosure: Scott J. Redler is long AAPL, MBIO, PTON, QQQ, SPY, is short PTON calls, SPY calls, SPY puts

Here's the naked chart:

Now let's break the monthly chart down step-by-step.

(A): It started with the $384 top set in August 2021, marked with the “A” on the chart:

(B): META fell to $344 to confirm the false breakout, and to have us on our toes for more downside.

(C): META then lost the 8 and 21 month moving averages as the stock blew threw support and free-falled. Remember, each bar on this chart represents a month, so traders had plenty of chances to just book the loss and avoid more damage on the way down.

(D): Next, META broke below a bear flag $190, giving us yet another sell signal.

(E): Meta breaks through $154 support to approach key levels at $123 and $113.55.

The lesson here is simple: watch longer time frames, especially during a bear market. Sometimes, they can clarify things in a way daily charts can't.

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