Palantir Plunges Near All-Time Lows: Here's Why A Bounce Is Likely

Palantir Technologies, Inc PLTR plunged over 9% Monday, sliding through a solid support level near $7.20.

The American software and big data analytics was reacting negatively to its third-quarter earnings, which it printed before the market open.

Palantir reported quarterly earnings of 1 cent per share, missing the average estimate of 2 cents per share. The company said revenue increased 22% year-over-year to $478 million, which beat average analyst estimates of $470.31 million.

Palantir guided for its fourth-quarter adjusted revenue to come in between $508 million and $510 million versus the $502.68-million estimate.

On Jan. 27, 2020, Palantir reached an all-time high of $45 but has been heavily beaten down since then, plummeting over 85% between that date and May 12, when the stock reached an all-time low of $6.44.

Although Palantir has seen a few short periods of bullish price action between May and Monday, the stock has failed to regain much value, trading mostly under the $9 mark since Aug. 19.

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The Palantir Chart: Palantir negated its uptrend on Friday, when the stock fell under the most recent higher low, which was formed on Oct. 20 at $7.73. Technical traders may have seen the downturn on the horizon because on Oct. 26 and Nov. 1, Palantir printed a bearish double top pattern at $9.05.

• Although the uptrend has been negated, Palantir hasn’t confirmed a downtrend is in play by printing a lower high. When Palantir bounces, which is likely to occur over the next few trading days, traders can watch for the stock to print a bearish reversal candlestick, such as a doji or shooting star candlestick, under the $9 level to indicate a downtrend is in play.
• A bounce is likely to come because Palantir’s relative strength index (RSI) dropped to the 32% level Monday. When a stock’s RSI nears or reaches the 30% mark, it becomes oversold, which can be a buy signal for technical traders.
• Prior to a bounce taking place, Palantir may need to consolidate sideways because Monday’s move lower was taking place on high volume. As of late morning, over 30 million Palantir shares had exchanged hands compared to the 10-day average of 34 million.
• Palantir has resistance above at $7.18 and $8 and support below at $6.44 and the psychologically important $5 mark.

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