Stock Of The Day: Palantir Breaks Out As Classic 'Sell the News' Sets Up Rally

Shares of Palantir Technologies Inc. PLTR are trending higher Wednesday. The stock has been in a strong uptrend since it reversed after heading lower despite a good earnings report.

We have made it our Stock of the Day. It appears to be breaking out, and this is typically a bullish dynamic which would suggest further moves upwards.

The price action in Palantir after it released its earnings was confusing to many traders and investors. The numbers were ahead of estimates but the stock sold off. It was a classic case of ‘buy the rumor, sell the news.’

Wall Street widely anticipated a strong earnings report. Traders expected the report to be a catalyst for higher prices.

Because of this, they took positions and bought shares before the earnings were released. So, when the news hit the tape, the market had run out of buyers.

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And if no one is left to buy, the price can only move lower.

Now the stock appears to have broken resistance. This can be a bullish dynamic.

Resistance is a price level or zone where there is a large amount of sell interest or shares for sale.

If a stock is moving higher, there are more shares to be bought than there are to be sold. People who wish to buy are forced to outbid each other to draw sellers into the market. This could force the shares into an uptrend.

When stocks reach resistance, rallies end or pause.

Sometimes stock sell off of resistance. This happened to Palantir when it reached $124.00 early this month.

But sometimes when a stock reaches resistance, the buyers eventually overpower the sellers and the resistance ‘breaks.' This is bullish because if the shares are trading at a higher level than the resistance, it shows that the investors and traders who created the resistance have left the market.

They have finished or canceled their orders.

With this large amount of support taken off of the market, buyers will need to be aggressive and outbid each other again if they wish to acquire shares. This could set the stage for a continued move higher in Palantir.

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