Why Palantir's Stock Must Hold These Key Patterns: A Technical Analysis

Palantir Technologies, Inc PLTR on Monday announced it had been awarded a contract to continue providing a secure cloud-based data enclave to centralize data on COVID-19 by the National Institutes of Health's (NIH) National Center for Advancing Translational Sciences (NCATS). The two-year contract has a total potential value of $59.5 million.

The news didn’t help the stock and Palantir closed down almost 5%, just above an ascending trendline that has been propping it up since Oct. 21, 2020, shortly after Palantir went public.

See Also: Why Palantir Technologies Shares Are Falling

The Palantir Chart: On Monday, Palantir tested the ascending trendline as support and bounced up slightly, which created a short lower wick. Despite the wick, the candlestick can still be considered a bearish Marubozu which indicates lower prices may be in the cards, especially if Palantir’s stock cannot hold the trendline as support.

Palantir may also be trading in a rising channel on the daily chart. A rising channel is considered bullish as long as the stock continues to react bullishly to the lower trendline of the pattern. If Palantir holds and bounces from the lower trendline of the pattern, the stock may eventually trade up toward the top ascending trendline.

Palantir’s relative strength index (RSI) was measuring in at about 37% on Monday. When a stock’s RSI nears or exceeds the 30% level, it becomes oversold, which is a buy signal for technical traders. Palantir has reached an RSI of about 30% on only two other occasions (May 10 and July 13) and each time the stock hit the level, it reversed course into an uptrend afterward.

Palantir is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. On Sept. 29, Palantir lost support of the 200-day simple moving average, which indicates overall sentiment in the stock is now bearish.

• Bulls want to see big bullish volume come in and push Palantir’s stock back up toward the median line of the rising channel, which will indicate the pattern is recognized. Palantir has resistance above at $25.58 and $27.47.
• Bears want to see Palantir break down from both the rising channel and the ascending trendline on big bearish volume. If the stock can’t hold the trendlines as support, it could fall toward $21.04 and below the level there is further support at $17.06.