One of the top-performing stocks of 2024 was Applovin Corp. (APP), but as we move into early 2025, shares of APP have come under heavy selling pressure, as momentum stocks are now in the bullseye for profit takers. Shares of APP initially entered the favored zone of the SIA Russell 1000 Index in mid-2023 at a price of $16, and the rally ensued all the way up to $500 over the next several years, barely taking a breather. However, sentiment may have now flipped for APP, as the stock has pulled back significantly to just above $300, declining by over $200 per share. With shares still trading at a Price/Earnings ratio of over 100X, APP may be on shaky ground. At SIA, the most important indicator is relative strength, and when shares enter the "unfavored zone" of any of our SIA Reports, we take notice. APP may have now given us that shot across the bow. This decline in relative strength is evident in the attached charts in two ways: first, in the SIA Matrix Position chart where we have highlighted the decline in relative strength within the SIA NASDAQ 100 Index Report, and second, in the attached Point and Figure chart, where we have used the SIA Matrix Position Overlay Tool to show the rollover in relative strength within the SIA Russell 1000 Index Report. In the Point and Figure chart, shares of APP have now reached their first level of support at $311.65. If this level is broken, it may pave the way for lower prices. On the upside, resistance is marked at $350.96 and $403.15. Should shares break the $311 support level, the next levels of support are projected at $250.65 and further down at $172.05.
Illustrated another way, we have also attached the SIA candlestick chart, where massive red candles have dominated the trading over the past several weeks, reflecting a steep correction. Here, we see a period of consolidation where a small wick has formed at the bottom of the last candle, suggesting that investors may have begun to accumulate shares again. We have also highlighted a green uptrend line that intersects with this holding level around $300, making this level crucial. Additionally, we have marked a red dot to show the area where, if broken, it may indicate that sellers have once again gained control of the market. Finally, it's important to note the heightened volume levels, which, combined with the declining SIA SMAX score of only 5/10, further illustrate the increased risk to the downside. Shares of APP may not be alone in facing these pressures, as many stocks that have benefited from massive momentum over the past several years may be experiencing similar declines.
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