Meta falls to $618 as lawsuit and trendline breakdown deepen selloff

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Meta lawsuit and trendline breakdown

Highlights

- Meta closes at $618.94, extending its sharp correction after trendline breakdown.

- Entrepreneur Media lawsuit reignites regulatory and IP concerns for Meta’s AI models.

- Stock remains oversold with RSI near 25 but lacks evidence of reversal.

A new lawsuit filed by Entrepreneur Media accusing Meta of using copyrighted material to train its Llama AI models has added pressure at a moment when the technical setup was already fragile.

Breakdown confirms structural damage

Technically, Meta’s chart has suffered meaningful damage. The stock sliced through its 20-day, 50-day, and 100-day EMAs without any sign of recovery, confirming that sellers have taken control. The decline accelerated once price broke below the ascending trendline connecting the April and July lows — a line that had defined the uptrend for most of the year. Once that level failed, momentum shifted decisively downward.

Meta stock price dynamics (Source: TradingView)

Meta now sits near a key demand zone between $615 and $625, an area that acted as resistance during September’s consolidation and support during the summer pullback. If this level fails to hold, the next downside targets include the 200-day EMA around $577 and the $565–$580 region, where the next major base lies.

Momentum signals suggest exhaustion but not yet reversal. The RSI at 25 reflects deeply oversold conditions, but in breakdown phases, such readings can persist as institutional selling continues. For buyers to regain control, Meta must reclaim the 100-day EMA near $711, followed by the 20-day EMA around $690, which aligns with the underside of the broken trendline. Only a close above those levels would signal stabilization.

Lawsuit amplifies market pressure

The timing of the Entrepreneur Media lawsuit has worsened market sentiment. The case accuses Meta of using copyrighted text and articles to train its Llama AI systems without authorization — echoing broader intellectual property disputes that have emerged across the AI sector. For investors, this raises concerns about legal liabilities and potential financial exposure related to Meta’s aggressive expansion into generative AI.

Volume patterns confirm that exits are outweighing dip-buying. Selling pressure has intensified as daily red candles print with rising volume, suggesting that funds are reducing exposure rather than adding at lower levels. The lawsuit has also reignited fears that Meta could face further scrutiny from U.S. and European regulators over content licensing and data training practices.

Still, some analysts see this pullback as a technical reset following an extended rally. The company’s fundamentals — strong revenue growth from Reels and steady ad demand across its platforms — remain intact. Yet the short-term chart favors sellers until evidence of institutional demand reappears.

If Meta stabilizes above the $615–$625 zone, it could trigger a short-covering bounce toward $690–$710. Losing $600, however, would expose the stock to a deeper correction into the high $500s, erasing much of the summer’s gains.

Earlier analysis noted that Meta’s rally had become stretched and vulnerable to external shocks, particularly from the regulatory and AI-content fronts. That risk has now materialized. The loss of key trendline support confirms the technical breakdown, and while the stock is oversold, no reversal signs have appeared yet.

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