Palantir Stock Holds Above Lower Gap As AI Companies Continue To Trend Lower: A Technical Analysis

Palantir Technologies, Inc PLTR was holding relatively flat Thursday, despite C3.ai Inc AI plunging almost 12% after printing mixed second-quarter earnings.

AI-based companies have trended lower recently, pulled down by NVIDIA Corp NVDA, which retraced about 8% since printing a third-quarter earnings beat on Nov. 21. While Palantir fell about 13% since Nvidia’s report, the former remained up 20% since Nov. 1 and needed a retracement.

Palantir’s sell-off may seem drastic, especially for those who took a recent position, but the stock could trend lower still before rebounding due to several technical patterns that have developed on Palantir’s chart: the stock recently lost support at the 50-day simple moving average (SMA), it’s entering into the upper range of a lower gap and Palantir is trading in a confirmed downtrend.

See Also: Stephen Cohen Selling, Cathie Wood Buying: What's Going On With Palantir Stock?

A downtrend occurs when a stock consistently makes a series of lower lows and lower highs on the chart. The lower lows indicate the bears are in control while the intermittent lower highs indicate consolidation periods.

Traders can use moving averages to help identify a downtrend with descending lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term downtrend.

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The Palantir Chart: Palantir’s downtrend began on Nov. 21 after the stock topped out at $21.85. Since then, Palantir made a consistent series of lower highs and lower lows, with the most recent lower high formed near the $21.30 mark on Dec. 1 and the most recent confirmed lower low printed on Nov. 27 at $18.62.

• On Wednesday, Palantir fell under the 50-day SMA and entered a lower gap that exists between $14.96 and $17.21. Gaps on stocks fill about 90% of the time and while bullish traders don’t want to see Palantir plunge an additional 13%, the stock is likely to find support at the bottom of the gap, which may align with the 200-day SMA if that happens.
• Palantir is also trading in a bearish inside bar pattern, with Thursday’s price action taking place within Wednesday's trading range. Bearish traders could watch for the stock to break down under Wednesday’s low-of-day on higher-than-average volume, which would indicate the pattern was recognized.
• Bullish traders want to see the stock eventually form a bullish reversal candlestick, such as a doji or hammer candlestick, which could indicate the local bottom has occurred and a rebound is on the horizon.
• Palantir has resistance above at $17.84 and at $19.95 and support below at $16.29 and at $14.58.

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