Palantir Treks North Following Break Of Bull Flag: Where To Watch For The Pullback

Zinger Key Points
  • Palantir completed the 41% measured move of its bull flag break.
  • Eventually a pullback is likely to come because Palantir's RSI is in overbought territory.

Palantir Technologies, Inc PLTR was trading up into the $13 range again on Thursday, which Benzinga pointed out was likely to happen when the stock broke up from a bull flag on May 17.

Cathie Wood’s asset management firm Ark Invest has been purchasing shares since the company printed better-than-expected quarterly earnings on May 8.

As Palantir has surged higher, the stock has stalled for brief periods of consolidation and on Wednesday, Palantir settled into an inside bar pattern.

An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.

An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar and each is called an "inside bar."

A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.

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The Palantir Chart: Palantir’s inside bar leans bullish, because the stock was trading higher before forming the pattern and on Thursday, Palantir was surging up near Tuesday’s high-of-day. If Palantir is able to close the trading session toward the $14 mark, a new 52-week high will be established, which could bring in bullish momentum.

  • If Palantir continues to trek higher on Thursday, the stock’s relative strength index (RSI) will heat up further, which will put Palantir well into overbought territory. Eventually, a longer-term period of consolidation is likely to drop the stock’s RSI back down under the 70% level.
  • Bearish traders can watch for Palantir to print a bearish reversal candlestick, such as a doji or shooting star candlestick, to indicate the local top has occurred. Bullish traders who aren’t already in a position may choose to practice patience and wait for a more significant pullback before finding an entry.
  • Palantir has resistance above at $13.18 and $14.58 and support below at $10.99 and $9.79.

Image: Shutterstock

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