Key Takeaways
AppLovin (
APP
) shares surged Wednesday as investors reassessed their positions in the AI-powered advertising platform after selling accelerated in the stock yesterday.
The one-time AI favorite has lost more than 40% of its value since setting its record high last month, with sentiment taking a hit after short sellers published reports in February,
accusing the company of deceptive practices
. Analysts at Piper Sandler defended the stock this week, saying it stands to benefit from positive
e-commerce
advertiser adoption trends through the first quarter.
Despite the recent downturn, AppLovin shares have more than quadrupled over the past 12 months amid impressive earnings and sales growth. The stock gained more than 6% on Wednesday to close around $297 amid a broader recovery for tech stocks
Below, we break down the
technicals
on AppLovin’s chart to point out crucial price levels that investors may be watching.
Record High Marks Bull Trap
Following a
breakaway gap
to a new record high in mid-February, AppLovin shares swiftly reversed to create a
bull trap
, a trading event where rising prices lure buyers before a sudden drop causes losses as investors sell at lower levels.
More recently, the stock found buying interest near the early-November gap, with the price trading roughly midway between the 50- and
200-day moving averages
, though selling resumed on Tuesday.
While the shares registered increasing
trading volume
during the steep selloff, turnover has moderated since the stock’s local bottom early last week as investors assess the stock’s next move.
Let’s apply
technical analysis
to identify several crucial
support and resistance
levels of significant interest on AppLovin’s chart.
Crucial Support Levels to Watch
A continuation of the recent move lower may see the shares revisit the $235 level, an area on the chart that provided support earlier this month near the low the early-November breakaway gap.
Selling below this important technical level could trigger a drop to around $170. Investors may look for buying opportunities in this region near a narrow period of
consolidation
that preceded the breakaway gap discussed above.
Key Resistance Levels to Monitor
A move higher from current prices may see the shares make a move up to the $390 area. This region could provide overhead selling pressure near the upper levels of a narrow
trading range
that formed on the chart between early December and mid-February.
Finally, the
bulls
’ ability to reclaim this level may drive a move back up to around the
psychological
$500 level, a location on AppLovin’s chart likely to gain significant attention near the stock’s
all-time high (ATH)
. A volume-backed close above this region could see the shares continue their longer-term move higher.
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As of the date this article was written, the author does not own any of the above securities.
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