A short squeeze could keep APP surging
AppLovin Corp (NASDAQ:APP) stock is down 3.6% to trade at $699.65 at last check, as the tech sector struggles ahead of today's interest rate decision. However, the equity is fresh off its best weekly performance since September and sports an impressive 158.2% nine-month lead. The shares are also within striking distance of their Sept. 29, record high of $745.61. With a historically bullish signal now flashing, APP could see the extra push needed to hit a new record peak.
Digging deeper, AppLovin stock's recent surge comes amid low implied volatility (IV), per its Schaeffer's Volatility Index (SVI) of 57% that ranks in the 12th percentile of its annual range. This has occurred seven other times in the last five years, after which the equity was was higher one month later 71% of the time, averaging a 12.6% gain. From its current perch, a similar move would place APP at a fresh record high of $787.80.
Shorts are already hitting the exits, but a continued exodus could keep APP surging. Short interest fell 9.3% in the most recent reporting period, yet the 14.87 million shares sold short still make up 6% of the stock's available float, or more than two days' worth of pent-up buying power.
Short-term options traders have been much more bearish than usual, too. This is per the equity's Schaeffer's put/call open interest ratio (SOIR), which sits in the 88th percentile of its annual range. This means an unwinding of pessimism could keep the wind at APP's back.