Stock Of The Day : Is A Reversal In Applovin Coming?

Shares of AppLovin Corporation APP are down big Friday. But they are close to a price level that may provide support and are oversold. This means they may be about to reverse and move higher.

We have made it our Stock of the Day because stocks at support that become oversold tend to rally.

The lower part of the chart is the Stochastics Indicator. It is a popular way to measure momentum.

If the blue line gets below the low horizontal red line, it indicates oversold conditions. As you can see, that's the case now. The last two times this happened were in March and April, and each time was a good buying opportunity.

Oversold means a stock has been pushed below its typical or usual trading range. When this happens, some traders will anticipate a reversion to the mean. This means a reversal and move higher.

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These traders will come into the market as buyers. Their actions could put upward pressure on AppLovin.

The stock is also trading around a price that has been support. Sometimes a level that had been support can become so again because of regretful sellers.

They sold their shares at the support level, but when the price moved higher, they vowed to buy them back… if they could do so for the same prices they sold them for. So, when the stock returns to this level, their buying could create support again.

Sometimes support breaks and the trend lower continues. This is why many traders wait for a reversal to begin before they take a position.

They know they would not be buying at the lowest price, but they believe the odds will be in their favor if they wait for the reversal to start before getting in.

It is too soon to know whether AppLovin will reverse or break the support and continue lower.  But because of the oversold conditions, there is a chance that new buyers will come into the market and put a floor under the price.

They may even push it higher.

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