EverHint - How Stock Splits Affect Technical Indicators: AMCR 1:5 Reverse Split Case Study

The Example: AMCR's Recent 1:5 Reverse Split

Stock: AMCR (Amcor plc)
Split Date: January 15, 2026 (13 days ago)
Type: 1:5 Reverse Split
What It Means: Every 5 old shares become 1 new share

Part 1: Understanding the Split Mechanics

What Actually Happened to AMCR Shareholders

Hypothetical Example (Before Split - January 14, 2026):

• You own: 1,000 shares
• Price per share: $2.00
• Total portfolio value: $2,000

After Split (January 15, 2026):

• You now own: 200 shares (1,000 ÷ 5)
• Price per share: $10.00 ($2.00 × 5)
• Total portfolio value: $2,000 (unchanged)

Critical Point: Your wealth doesn't change. Only the number of shares and price per share change.

Part 2: How Data Providers Adjust Historical Prices

This is the KEY to understanding technical indicators.

All Historical Prices Get Multiplied by 5

When AMCR executed the 1:5 reverse split on January 15, every data provider (Bloomberg, Yahoo Finance, FMP, etc.) went back through all historical data and adjusted it.

Original Historical Prices (Before Adjustment):

Date          | Original Close Price
------------- | -------------------
Jan 14, 2026  | $2.00
Jan 13, 2026  | $1.95
Jan 10, 2026  | $2.10
Jan 05, 2026  | $1.85
Dec 15, 2025  | $1.80
Nov 15, 2025  | $2.20
Aug 15, 2025  | $2.50
... (going back 200+ days for SMA200)

Split-Adjusted Historical Prices (After January 15, 2026):

Date          | Original | Adjusted (× 5)
------------- | -------- | --------------
Jan 14, 2026  | $2.00    | $10.00
Jan 13, 2026  | $1.95    | $9.75
Jan 10, 2026  | $2.10    | $10.50
Jan 05, 2026  | $1.85    | $9.25
Dec 15, 2025  | $1.80    | $9.00
Nov 15, 2025  | $2.20    | $11.00
Aug 15, 2025  | $2.50    | $12.50
... (all multiplied by 5)

Why? So that charts don't show a massive gap on January 15. This creates visual and mathematical continuity.

Part 3: Impact on SMA200 (200-Day Simple Moving Average)

What is SMA200?

Definition: The average of the last 200 trading days' closing prices.

Formula:

SMA200 = (Sum of last 200 closing prices) ÷ 200

BEFORE the Split (January 14, 2026)

Using original, unadjusted prices:

Example Calculation:

Last 200 days: Prices ranged from $1.80 to $2.50
Sum of 200 prices = $420 (hypothetical)
SMA200 = $420 ÷ 200 = $2.10

Current Price: $2.00
SMA200: $2.10
Signal: Price is BELOW SMA200 by $0.10 (-4.8%)
Interpretation: Bearish (price under long-term average)

AFTER the Split (January 15, 2026)

Using split-adjusted prices (all multiplied by 5):

Same Calculation, Adjusted Data:

Last 200 days: Prices now range from $9.00 to $12.50 (all × 5)
Sum of 200 prices = $2,100 ($420 × 5)
SMA200 = $2,100 ÷ 200 = $10.50 ($2.10 × 5)

Current Price: $10.00 ($2.00 × 5)
SMA200: $10.50 ($2.10 × 5)
Signal: Price is BELOW SMA200 by $0.50 (-4.8%)
Interpretation: Still Bearish (same relationship)

Key Insight: The RELATIONSHIP is Preserved

Result: The technical signal (price below SMA200) remains exactly the same. The indicator is still valid.

Part 4: Impact on SMA50 (50-Day Simple Moving Average)

Same Principle, Shorter Window

BEFORE Split:

Last 50 days: Sum = $105
SMA50 = $105 ÷ 50 = $2.10

Current Price: $2.00
SMA50: $2.10
Distance: -$0.10 (-4.8% below SMA50)

AFTER Split:

Last 50 days: Sum = $525 ($105 × 5)
SMA50 = $525 ÷ 50 = $10.50 ($2.10 × 5)

Current Price: $10.00 ($2.00 × 5)
SMA50: $10.50 ($2.10 × 5)
Distance: -$0.50 (-4.8% below SMA50)

Result: Still 4.8% below SMA50. The indicator relationship is preserved.

Part 5: Impact on RSI14 (14-Day Relative Strength Index)

What is RSI14?

Definition: Momentum oscillator (0-100 scale) measuring the speed and magnitude of price changes.

Formula:

RSI = 100 - [100 / (1 + RS)]
where RS = Average Gain / Average Loss over last 14 days

Critical Difference: RSI Uses PERCENTAGE Changes

Unlike SMA (which uses absolute prices), RSI calculates based on percentage gains and losses.

Example Day-to-Day Price Movement:

BEFORE Split:

Day 1: $2.00
Day 2: $2.10
Change: +$0.10
Percentage Gain: +5.0% ($0.10 / $2.00)

AFTER Split (Same Movement, Adjusted Prices):

Day 1: $10.00 ($2.00 × 5)
Day 2: $10.50 ($2.10 × 5)
Change: +$0.50 ($0.10 × 5)
Percentage Gain: +5.0% ($0.50 / $10.00)

Key Point: The percentage change is IDENTICAL (+5.0%).

RSI Calculation Example

Last 14 Days of Percentage Changes (Before Split):

Day 1: +5.0%
Day 2: -2.0%
Day 3: +3.0%
Day 4: +1.0%
... (14 days total)

Average Gain: +3.0% per day
Average Loss: -2.0% per day
RS = 3.0 / 2.0 = 1.5
RSI = 100 - [100 / (1 + 1.5)] = 60

Last 14 Days After Split (Split-Adjusted Prices):

Same percentage changes:
Day 1: +5.0% (now $10.00 → $10.50 instead of $2.00 → $2.10)
Day 2: -2.0%
Day 3: +3.0%
... (same percentages)

Average Gain: +3.0% per day (unchanged)
Average Loss: -2.0% per day (unchanged)
RS = 3.0 / 2.0 = 1.5 (unchanged)
RSI = 60 (EXACTLY THE SAME)

Result: RSI is COMPLETELY UNAFFECTED

Why: RSI only cares about percentage changes, and those don't change when prices are proportionally adjusted.

Part 6: What DOES Change?

While the mathematical relationships are preserved, some things DO change:

1. Absolute Price Levels (Obviously)

Support/Resistance:

• Old support: $1.80 → New support: $9.00
• Old resistance: $2.50 → New resistance: $12.50

Analyst Price Targets:

• Old target: $2.75 → New target: $13.75

2. Volume Patterns

Daily Volume:

• Old average: 10 million shares/day
• New average: 2 million shares/day (10M ÷ 5)

Why: Fewer shares outstanding means lower volume in absolute terms.

3. Options Contracts

Strike Prices:

• Old: $2.50 call option
• New: $12.50 call option (× 5)

Contract Size:

• Old: 100 shares per contract
• New: 20 shares per contract (100 ÷ 5)

Impact: Non-standard contract sizes make options less liquid after reverse splits.

4. Psychological Perception

Before: "$2 stock" (looks cheap, penny stock-ish)
After: "$10 stock" (looks more established)

This is often a goal of reverse splits - to appear more institutional-grade.

Part 7: Why We Still Exclude ±7 Days Around Splits

If the indicators are preserved, why do we exclude stocks from scanners for 7 days before and after the split?

Problem 1: Data Feed Lag

Not all data providers adjust simultaneously:

• Day of split: Some feeds show old prices, some show new
• Days 1-3 after: Mixed data causes calculation errors
• Days 4-7 after: Gradual stabilization

Problem 2: Price Discovery Volatility

Days Before Split (Anticipation):

• Traders exit positions to avoid uncertainty
• Volume spikes, unusual price swings
• SMA values are valid, but price action is abnormal

Day of Split:

• Market makers adjust quotes
• Algorithmic systems recalibrate
• Wide bid-ask spreads
• Flash moves common

Days After Split:

• New price equilibrium sought
• Low liquidity if reverse split
• Oversized moves on small volume

Problem 3: False Crossover Signals

Scenario: Scanner looks for "Price crosses above SMA50"

Day Before Split (Jan 14):

Price: $2.05
SMA50: $2.10
Status: Below (no signal)

Day of Split (Jan 15):

Price: $10.30 (volatile opening)
SMA50: $10.50 (adjusted)
Status: Still below, but...

Intraday on Jan 15:

Price spikes to $10.60 briefly (algorithmic confusion)
Scanner: "PRICE CROSSED ABOVE SMA50!"
Reality: False signal due to split-day volatility

Days After (Jan 16-22):

Price settles at $10.25
SMA50: $10.50
Status: Still below (crossover was fake)

Problem 4: Volume-Based Indicators Unstable

If your scanner uses:

• Volume > 20-day average
• ADV20 (20-day average dollar volume)
• OBV (On-Balance Volume)

These all get distorted during the adjustment period because:

• Historical volume is divided by 5
• Current volume is actual (lower)
• Takes days for averages to stabilize

Part 8: Practical Example - Why AMCR is Excluded

AMCR Split Timeline

Split Date: January 15, 2026

Hard Exclude Window: January 8-22, 2026 (±7 days)

What Happens Day-by-Day

January 8-14 (Week Before):

• Traders exit to avoid split uncertainty
• Volume elevated: 15M shares/day (vs 10M average)
• Price volatile: Swings from $1.95 to $2.10
• SMA indicators valid, but price action abnormal
• Risk: False breakouts or breakdowns

January 15 (Split Day):

• Market opens: Data feeds adjusting
• Price: $9.85 → $10.40 → $10.15 (wide swings)
• SMA50: Jumps from $2.10 to $10.50
• Volume: 12M shares (divided by 5 = 2.4M in new terms)
• Risk: Impossible to trade cleanly

January 16-22 (Week After):

• Price discovery: Where should $10 stock trade?
• Volume: 3M, 1.5M, 2.8M, 1.2M (erratic)
• SMA values adjusting as recent data mixes with adjusted historical data
• RSI: More stable, but price volatility creates false momentum signals
• Risk: Premature entries before stabilization

January 23+ (Safe Window):

• Volume stabilizes: ~2M shares/day average
• Price finds range: $9.80-$10.40
• SMA crossovers now meaningful
• RSI signals reliable again
• Safe: Resume normal scanning

Part 9: Summary - What You Need to Know

✅ What Stays the Same

1. SMA200 Relationship: If price was 4.8% below SMA200 before split, it's still 4.8% below after
2. SMA50 Relationship: Same proportional relationship preserved
3. RSI14 Values: Completely unchanged (uses percentage changes)
4. Technical Signal Validity: All crossovers, support/resistance relationships maintained
5. Strategy Logic: Your trading rules remain mathematically valid

⚠️ What Changes

1. Absolute Price Levels: $2 becomes $10 (× 5 for reverse split)
2. Support/Resistance Zones: All multiplied by split ratio
3. Volume Numbers: Divided by split ratio (10M becomes 2M shares)
4. Options Contracts: Non-standard sizes, less liquid
5. Perception: Looks like different stock ($10 vs $2)

🚫 Why We Exclude ±7 Days

1. Data Feed Issues: Not all providers adjust simultaneously
2. Price Discovery: Extreme volatility around execution
3. False Signals: Algorithmic confusion creates fake breakouts
4. Volume Distortion: Takes days for averages to stabilize
5. Risk Management: Avoid unnecessary complexity and whipsaw trades

Part 10: The Bottom Line for AMCR

For Scanner Strategies Using SMA200, SMA50, RSI14:

✅ After January 23, 2026: All indicators are fully reliable again

• SMA values stabilized with split-adjusted data
• Price discovery complete
• Volume patterns normalized
• Safe to include in scans

🚫 January 8-22, 2026: Excluded from all scanners

• Too much volatility risk
• Data adjustment period
• False signal potential
• Not worth the complexity

📊 Technical Levels (Split-Adjusted):

• If AMCR was at $2.00 with SMA200 at $2.10 before split
• Now trading around $10.00 with SMA200 at $10.50
• Same bearish signal: Price below 200-day average
• Wait for crossover above $10.50 for bullish reversal

Conclusion: Splits Don't Break Technical Analysis

The key insight: Stock splits don't invalidate technical indicators. The mathematics adjust proportionally, preserving all relationships.

However: The ±7 day exclusion window isn't about broken indicators - it's about:

• Avoiding execution-day chaos
• Preventing false signals from data feed lag
• Managing elevated volatility risk
• Waiting for post-split price discovery

AMCR Example Summary:

• 1:5 reverse split on January 15, 2026
• All historical prices multiplied by 5
• SMA200: $2.10 → $10.50 (relationship preserved)
• SMA50: $2.10 → $10.50 (relationship preserved)
• RSI14: Unchanged (uses percentages, not absolutes)
• Excluded: January 8-22 for safety
• Resumption: January 23+ when stable

Your scanners work perfectly - we just pause them around corporate actions to avoid noise and false signals.

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