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Key Takeaways
- AppLovin’s shares saw a significant 30% surge in after-hours trading on Wednesday.
- The artificial intelligence-powered advertising platform exceeded analysts’ expectations for Q4 earnings and provided a promising outlook for the current quarter.
- Trading patterns indicate a breakout from a pennant formation, potentially leading to continued upward movement.
- Using technical analysis techniques, a price target of $754 is forecast for the stock.
- Investors need to monitor support levels near $290, $168, and $116.
AppLovin (APP) experienced a substantial 30% jump in after-hours trading on Wednesday. This sharp rise occurred after the company, known for its AI-driven advertising platform, surpassed Wall Street’s fourth-quarter profit forecasts and issued optimistic guidance for the current quarter. AppLovin’s advanced technology helps game makers monetize their apps through targeted advertising. This latest success signifies a growing trend as the demand for such AI-powered advertising solutions escalates.
In terms of financial performance, AppLovin predicted a first-quarter revenue range of $1.36 billion to $1.39 billion, clearly exceeding analysts’ projections of $1.32 billion. Of this expected revenue, $1 billion is anticipated to come from the advertising segment. The company emphasizes that it is still in the early stages of enhancing its AI algorithms, hinting at promising future growth potential.
AppLovin’s share price has risen by 17% year-to-date as of the Wednesday close, reflecting a dramatic surge of 700% over the past 12 months. This heightened interest is primarily due to the surging demand for and effectiveness of the company’s AI-based advertisement system.
To understand the potential future trajectory of AppLovin’s stock, it is essential to analyze its technical chart and identifying key support and resistance levels. This breakdown aims to highlight the most significant price points investors must monitor.
Pennant Pattern Breakout
Since reaching its peak in early December, AppLovin’s shares have formed a consolidation pattern known as a pennant, indicating continued upward movement despite the consolidation.
Given this formation, a strong opening is expected on Thursday, signaling the beginning of the next upward phase for the stock.
While the relative strength index (RSI) confirms a bullish momentum with a reading above 70, it also suggests that the price may dip due to profit-taking, a common occurrence when stocks exceed the overbought territory.
Applying technical analysis helps in forecasting a likely price target and identifying potential retracement points. This method aids investors in making informed decisions about buying or selling.
Measured Move Price Target
Investors often use the measured move technique, also known as the measuring principle, to forecast an upside price target.
This technique involves adding the length of the prior uptrend to the upper trendline of a consolidation pattern.
Applying this method to AppLovin’s chart, a price target of $754 is calculated. This figure, which represents the distance from the previous uptrend to the upper trendline of the pennant, is where investors may consider locking in profits.
Major Support Levels to Watch
During pullbacks, the stock may initially dip to around $290. This level, which corresponds to the low of the pennant formation, aligns with a weekly wide-ranging bar’s closing price in early November. This provides a potential support for the stock.
If prices fall below this level, a potential drop to $168 may occur. This price point is significant as it coincides with the 50-period moving average, offering another potential support area.
A deeper correction could push the stock down to $116, a level where the prominent swing high from November 2021 is located. Buy-and-hold investors might consider entering at this level due to its historical significance and potential for a consolidation period followed by an upward move.
Investing in stocks, especially in technology-driven companies like AppLovin, involves risks. It’s crucial to conduct thorough research and consider seeking advice from financial experts before making investment decisions. Now is a perfect time to reassess your investment strategies given AppLovin’s robust performance and strong future outlook.
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