PreMarket Prep Stock Of The Day: Nailing The Palantir Price Action

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Different factors go into interpreting the price action, up or down, in an issue following an earnings report. One of those factors is the open interest in the weekly (or longer-term) options markets.

On Thursday’s show, this dynamic was discussed with respect to Palantir Technologies PLTR, the PreMarket Prep Stock of the Day.

Palantir Price Action Ahead Of Earnings: On May 11, Palantir put in a major bottom at $17.06 and embarked on a substantial rally. That move came to an abrupt end when it put in a pair of highs at the $27.50 area at the end of June.

The retreat off that high came on July 19, when it bottomed at $20.55. Ahead of the report, it has been in a nine-day trading range from $21.69 to $23.52 and spent a majority of those sessions chopping around in the $22 handle.

In Wednesday’s session, it had a range of $22.09-$23.19 and settled to closer near the low at $22.35.

Palantir's Q2 Report: Before open, the company reported quarterly earnings of 4 cents per share, which beat the analyst consensus estimate of 3 cents by 33.33%. The company reported quarterly sales of $376 million, which beat the analyst consensus estimate of $353.23 million by 6.45%. 

Palantir forecast third-quarter sales $385 million vs. a $376.4-million estimate and raised FY21 adjusted free cash flow guidance from $150 million to $300 million. 

Potential Impact Of Palantir Options Trading: When the issue was being discussed on the show, it was trading higher by over $2 at the $24.70 area.

By looking at the huge open interest in the $25 weekly calls (and longer) dated in the options chain, Dennis Dick, explained in great detail how that open interest may have an impact on the price action in the issue.

“The millions of shares controlled by the owners of the options," Dick said, "will affect the price action as they attempt to work out of their positions.”

The author of this article noticed potential resistance at the pair of highs from early July at the $25.30 level as a potential target for the upcoming session.

The full discussion on the issue from Thursday’s show can be found here:

PLTR Price Action: After a mich higher open ($24.45 vs. $22.35), Palantir peaked at about $24.70 Thursday and had a brief decline to $23.88 before resuming its moved higher. It went on to breach the $25 level and aforementioned highs at the $25.30 level, rallying to $25.76 and reversing course. 

The reason for that may have been owners of the large amount of $25 calls were attempting to lock in profits and have a hedged position as opposed to exiting the option outright.