Blue Owl stock price has crashed in the past few months, turning one of the most blue-chip financial giants into a fallen angel. It dropped to a low of $10.50 on Friday, down sharply from the all-time high of $25.20. This retreat has brought its market capitalization to $15.4 billion from a record high of $43 billion.
Blue Owl stock technical analysis suggests the writing was on the wall
A closer look at the weekly chart shows that the ongoing Blue Owl stock crash was easy to predict and was in line with our previous forecast.
The chart below shows that the stock initially jumped to a record high of $18.45 in May 2024 and then pulled back to $14.23 in August 2024. This performance formed the left shoulder of the head-and-shoulders pattern.
The stock then bounced back and reached a record high of $25.20 in January last year and then slumped to $14.2. It then bounced back to $20, which formed the right shoulder
A H&S is one of the most common bearish reversal signs in technical analysis. This explains why the stock has continued its strong downward trend this month.
It has now plunged below the neckline at $14, confirming the bearish outlook. Also, the stock has dropped to the 78.6% Fibonacci Retracement level.
Additionally, the stock remains below all moving averages and the oversold level of the Murrey Math Lines tool. At the same time, the Average Directional Index (ADX) has soared to 25, its highest level since December last year.
Therefore, the most likely scenario is where the stock continues falling as sentiment in the private credit and equity business wanes. This retreat may push it to the extreme oversold level of $9.38.
On the flip side, a move above the resistance level at $14 will invalidate the bearish outlook and point to more gains.
OWL stock price chart | Source: TradingView
Why the OWL share price has imploded
Blue Owl share price has crashed in the past few months, erasing billions of dollars in value and making it one of the top laggards in the financial services industry. Its crash has also had a domino effect as other companies in the private credit industry, like Ares, Blackstone, and Apollo have all plunged.
Blue Owl’s plunge accelerated last year when the management attempted to merge two private credit funds. In that, OBDC, a publicly-traded fund would acquire OBDC II, a move that caused backlash among investors as the former always operated below NAV.
The crisis escalated this month when the management decided to sell $1.4 billion in direct lending assets to investors at 99.7% per value, which, in theory, is a positive outcome. However, there are concerns that the company’s decision to halt quarterly redemptions of funds.
Blue Owl stock price has also crashed because of the rising concerns about the private credit industry, which is currently worth over $1.8 trillion today. In a note to Bloomberg, an analyst said:
“The red flags we are seeing in private credit today are strikingly familiar to those of 2007 because of the worsening lender protections and convoluted liquidity terms that obscure the mismatch between what investors believe they own and what they can actually exit.”
Blue Owl stock price has also crashed because of the rising concerns about the artificial intelligence industry, where it has become a major funder. Just last week, OpenAI reduced its spending goal from $1.4 trillion to $600 billion.
Still, on the positive side, the most recent results showed that the company did well in the last quarter. Its revenue jumped by 20% in the last quarter to $755 million, while its net income soared by 130% to over $47 million.
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