Palantir Stock Bulls Must Negate This Key Pattern Or Bears Will Rejoice

Palantir Technologies, Inc PLTR has been a frustrating stock to trade despite remaining wildly popular with retail traders on various subreddits including r/WallStreetBets.

The most recent steep sell-off began on Nov. 9 when Palantir printed a third-quarter revenue beat and received a bearish reaction. The 6% decline on the day also dropped Palantir below a long-term ascending trendline, which may have been a strong sell signal for technical traders.

See Also: How to Buy Palantir Technologies Stock Right Now

The Palantir Chart: After losing the ascending trendline that had been acting as support since Oct. 21, 2020, Palantir gapped down again the following day and declined another 6% on the day before bouncing up slightly. Since Nov. 11, Palantir has been consolidating the move.

The steep drop paired with the slightly upwards consolidation has formed Palantir into a bear flag pattern on the daily chart, with the pole created between Nov. 9 and Nov. 10 and the flag formed between Nov. 11 and Wednesday. The measured move if the pattern is recognized, calculated by measuring the length of the pole as a percentage, is about 14%, which suggests Palantir could fall toward the $20 level on a break down from the flag.

If Palantir falls through the bottom parallel line of the flag formation, traders will want to watch for increasing bearish volume to gauge whether the pattern has been recognized. On Wednesday, Palantir briefly dropped through the flag but low volume helped the stock to recover.

Palantir has three gaps above on the chart and because gaps fill about 90% of the time it's likely the stock will trade back up into each range in the future. The first gap falls between $23.64 and $23.95, the second gap between $25.98 and $26.12 and the third gap is between the $30.30 and $31.26 range.

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. The stock is also trading well below the 50-day simple moving average, which indicates longer-term sentiment is bearish.

• Bulls want to see big bullish volume come in and push Palantir up above the eight-day EMA, which will negate the bear flag. The stock has resistance above at $23.27 and $24.13.
• Bears want to see big bearish volume come in and drop Palantir down through the bear flag pattern and then for momentum to push the stock through a support level at $21.82. Below the area there is further support at $21.04.

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