Blue Owl Capital (NYSE: OWL) has staged a remarkable recovery, climbing from a year-to-date low of $7.60 in April to around $11.85. The stock's 55% rebound has been accompanied by a golden cross formation and a bullish flag pattern, suggesting the uptrend may have further room to run. Additionally, easing concerns in the AI sector could provide an extra tailwind for the alternative asset manager.
Technical indicators point to continued gains
The daily chart shows OWL breaking above the key resistance level of $10.55, which marked its May and June highs. The golden cross—where the 50-day weighted moving average crosses above the 200-day WMA—occurred on August 14, a classic bullish signal. The stock also trades above the Supertrend indicator, confirming that buyers are in control. The bullish flag pattern, a continuation formation, suggests the next target could be $15, representing roughly 27% upside from current levels. A drop below $10.50 would invalidate the bullish setup.
Turnaround strategy gains traction
Blue Owl's recovery comes after a sharp decline earlier this year, driven by cracks in the private credit sector. The company's turnaround efforts are bearing fruit, with a strategic shift away from direct lending and toward real assets and AI infrastructure. In its latest quarterly results, management noted that real assets now account for about 30% of assets under management (AUM), up from a smaller share previously. This diversification helped boost revenue by 27% year-over-year.
Direct lending, which once made up nearly half of AUM, has been reduced to roughly 35%. Total AUM grew 12% in the second quarter to over $319 billion, while permanent capital rose 10% to $225 billion. Revenue for the quarter reached $753 million, up 7%.
Management highlighted the resilience of the franchise during a turbulent period: “As we look at the first half of 2026 across Blue Owl, a period spanning the most acute headline noise and elevated redemptions for non-traded BDCs, we raised more than $16.5 billion of equity capital across the firm or more than 40% of our last 12-month total.”
Valuation and short interest set up potential squeeze
Despite the rally, Blue Owl remains attractively valued with a forward price-to-earnings ratio of 13, well below the S&P 500's average of 22. The stock also carries a high short interest of 16%, meaning a significant number of investors are betting against it. If the positive momentum continues, these short sellers could be forced to cover their positions, potentially amplifying the upside—a scenario often referred to as a short squeeze.
Blue Owl's recovery mirrors broader strength in the alternative asset management space. Peers like Ares Management have surged over 50% from their lows, Apollo Global Management has climbed 35% to $134, and KKR and Blackstone have also posted double-digit gains. This sector-wide rebound suggests improving sentiment toward private credit and alternative investments.
Investors should note that while the technical and fundamental signals are encouraging, the stock remains sensitive to broader market conditions and the performance of the private credit sector. The recent short squeeze dynamics seen in other markets highlight how quickly sentiment can shift. Similarly, golden cross patterns in other stocks have often preceded sustained rallies, but they are not guarantees.
As Blue Owl continues to execute its turnaround, the combination of a favorable technical setup, improving fundamentals, and elevated short interest could keep the stock on an upward trajectory. However, investors should remain mindful of the risks, including potential volatility in the AI and private credit sectors.
This article is for informational purposes only and does not constitute financial advice.
