Shares of Digital Turbine (NASDAQ:APPS) have the wind at their back in Tuesday’s session. And for tomorrow’s investors, drivers off and on the price chart are even bigger news to profit from. Let me explain.
Most often as the saying goes, one day doesn’t make a trend. But it can be an important clue. And that appears to be the case for APPS stock.
The mobile ad and app discovery installation software is soaring higher by nearly 17% intraday Tuesday following news of Digital Turbine’s inclusion into the S&P MidCap 400 Index.
The significant one-day gain is a byproduct of Digital Turbine’s smallish float of just 87 million shares.
Now factor in sudden demand from investable funds tracking the average needing to purchase APPS stock to continue matching the performance of the mid-cap bellwether. It’s a powerful combination to be sure. At least today.
Today’s News and Yesterday’s News
Tuesday’s news-driven demand will quickly run its course. But the longer-term bull case for APPS stock is all the more compelling than it was just a day ago.
If nothing else, being a constituent in the S&P MidCap 400 is free marketing with no downside.
The addition puts shares on the radars of traders looking at the index for fresh investable ideas, right? The inclusion also allows other funds not necessarily mirroring indices but maybe having strict selection mandates the opportunity to now purchase APPS stock.
But there’s also more to the Digital Turbine story that should grab investors’ attention.
Bottom-line, APPS is a growth stock. Sure, Digital Turbine hasn’t proven a popular pick of late, but its most recent quarterly results in early August continues to support the outfit’s financial wherewithal.
Don’t believe me? InvestorPlace’s Louis Navellier, a guy with a knack for profiting from tenbaggers, has more than just noticed APPS stock. Aside from recent upbeat support for shares, he’s in it to win it and positioned long.
Digital Turbine has other factors working in the favor of buyers right now.
At their recent low this month APPS had shed 53% from its early March high. And today that’s turned into a significant positive.
First, it’s fair to blame a good portion of those losses on Wall Street’s abrupt and systematic exit out of higher multiple growth stories this year. Look no further than growth stock EV behemoth Tesla (NASDAQ:TSLA) as Exhibit A of that reality.
TSLA stock has declined as much as 40% this year and continues to lag its large-cap value peers despite its massive influence on the large-cap S&P 500 and Nasdaq.
Second, as much as some insist the trend is your friend, APPS stock’s current bearish cycle looks a great deal friendlier than that blanket-style, Wall Street wisdom.
Growth stocks are notorious for correcting suddenly and irrespective of the broader market’s price action following a ginormous rally. And without question, APPS stock’s roughly 2,800% run from it’s Covid-induced low of around $3.48 to $102.56 in just under a year certainly qualifies.
What’s more and right now, today’s big gains in APPS stock may not make a trend, but based on the weekly price chart, it’s a fine starting point for a well-supported pattern bottom and conclusion to a bear market cycle.
APPS Stock Weekly Price Chart
Digital Turbine’s fall from the grace and out of the trading accounts of growth stock traders since March has resulted in a bearish downtrend to form. But cycles of this size also routinely come and go. And today a more bullish phase could be emerging in APPS stock.
Technically, Tuesday’s strong gains in shares have confirmed a two-week long inside candlestick bottoming pattern.
The weekly formation is further backed by price action testing Fibonacci zone support and an oversold stochastics indicator signaling a bullish crossover.
All told, the setup looks good, though hardly special these days for a stock of APPS caliber. Also, with shares up around 17%, a modest pullback wouldn’t exactly be a surprise. However, that’s not to say investors need to wait for a decline in shares before purchasing Digital Turbine.
If you’re agreeable with owning APPS stock, I’d suggest an October $55/$70 collar combination.
This particular spread will cost investors a little something up front. But this type of hedged position allows investors to be in it to win it without trying to get too cute with timing an entry into shares. It’s a flexible strategy too.
Barring immediate gratification from this overall bullish position if APPS simply continues to rally by modifying the collar with a put sale on future APPS stock weakness, investors can position themselves even more smartly as others book profits, panic and that sort of thing.
On the date of publication, Chris Tyler does not hold (either directly or indirectly) positions in any securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.