Software stock AppLovin Corp (NASDAQ:APP) has experienced a significant decline since its early-June peak, dropping 12.2% since the beginning of the month. However, the shares are showing signs of a potential rebound, with a 2.9% increase to $345.27 at last glance. This positive movement is also supported by a historically bullish signal.
According to Schaeffer’s Senior Quantitative Analyst Rocky White, the recent pullback has brought APP back to its 50-day moving average. Specifically, the stock is within 0.75 of the trendline’s 20-day average true range (ATR) after spending at least 80% of the last 10 days and 80% of the last two months above it. In the past three years, there have been six other instances where similar signals occurred. Following these occurrences, APP was higher one month later 67% of the time, with an average gain of 8.3%.
If a similar magnitude move were to happen, the shares could potentially reach $400, an area that has served as both support and resistance over the past year. Despite the recent pullback, APP has still seen a remarkable 343% increase since June, with the majority of these gains coming from 2024, when the software company was the best-performing stock on the Nasdaq.
When considering the next move for the equity, options appear to be a favorable choice. AppLovin stock’s Schaeffer’s Volatility Index (SVI) of 60% ranks in the low 16th percentile of its annual range, indicating that options traders are pricing in low volatility expectations. Additionally, APP has consistently outperformed options traders’ volatility expectations over the last 12 months, making this an opportune time to consider options trading based on its Schaeffer’s Volatility Scorecard (SVS) of 81 out of 100.
In conclusion, despite the recent downturn, AppLovin Corp’s stock shows potential for a rebound based on historical trends and technical indicators. With low volatility expectations in the options market, investors may want to consider leveraging this opportunity to capitalize on potential gains in the near future.
