Palantir's Stock Broke Bullish, But Can It Hold?

When Palantir Technologies Inc PLTR reported first-quarter 2021 earnings on May 11, it marked a turning point for its stock.

Palantir’s revenue grew 49% year over year to $341 million, beating the consensus estimate of $332.23 million. Palantir’s guidance for second-quarter 2021 sees revenues of $360 million compared to the consensus estimate of $344.31 million.

Palantir also released news it will accept Bitcoin BTC/USD as a payment option and also said it was considering investments in Bitcoin and possibly other cryptocurrencies. 

Following its earnings print, shares shot up over 17% on the day, saving the stock from a downward spiral.

The Palantir Chart: Palantir has been trading in a bullish falling wedge since Feb. 22 although it has broken up from it on three separate occasions. Both occasions have ended up trapping bulls who didn’t sell their position because they were looking for a larger move to the upside.

After Palantir’s earnings report, its stock opened below the bottom descending line of the falling wedge and below a support level at $17.54 but it immediately recovered and made a bull move north. Palantir’s stock not only regained the $17.50 level as support but it closed over the top descending line of the falling wedge. During the following two trading sessions, the stock fell back into the falling wedge.

On Friday, Palantir’s stock made a fourth attempt to break up from the falling wedge and, once again, closed above it. The stock was able to capture the eight-day exponential moving average (EMA), which is bullish. Palantir is trading about 5% below the 21-day EMA and the eight-day EMA is trending below it but if the stock can push up further with momentum, it could recapture the 21-day EMA and eventually cause them to cross.

Palantir also has a gap above the $31 level and, because gaps fill 90% of the time, it's likely Palantir’s stock will trade in that price range again in the future.

Bulls want to see bullish volume give Palantir momentum to move further north to not create another bull trap. Although Palantir’s stock could backtest the upper trendline of the wedge, bulls want to see the line hold as support. If Palantir can sustain its bullish break, it has room to move up towards the $21 area. If it was able to regain the level as support it has room to move toward $25.21.

Bears want to see another bull trap play out and for Palantir to fall back into its wedge, which could eventually push the stock down under resistance near the $17.50 level. If Palantir’s stock was unable to hold that level as a support it could fall to the $14.40 mark.

PLTR Price Action: Shares of Palantir are down 0.5% to $19.97 at publication time.