Publish date:

Sell Palantir Stock Despite Potential $823 Million Army Contract?

Palantir stock erupted higher after announcing an $823 million contract with the Army, but now the gains are fizzling out. Time to sell?

Palantir  (PLTR) - Get Palantir Technologies Report stock is up 2.6% on Wednesday, as the major indexes claw back from early losses.

But it almost feels like defeat, given that Palantir shares were up more than 8% in premarket trading. The shares were even higher in Tuesday’s after-hours session, rising more than 14%.

The rally comes after the company announced it landed an $823 million contract with the Army.

These are the types of deal that get bulls excited, but the lesser stock gains on Wednesday are disheartening. That’s particularly true as the stock failed at a key technical area.

Trading Palantir Stock

Daily chart of Palantir stock.

Daily chart of Palantir stock.

Not long ago, Palantir stock was showing relative strength vs. the broader market.

But once it failed to hold our key support level near $27 to $27.50, the bulls began to lose control.

The stock broke through support, falling 16.5% in five straight sessions. The shares ultimately bottomed at $23.02.

TheStreet Recommends

With Wednesday’s gap-up open, Palantir stock opened above the 50-week and 21-week moving averages and rallied up to the 50-day and 200-day moving averages.

The latter group — the 50-day and 200-day — rejected Palantir, while the stock failed to hold the former group. Ouch.

That is some ugly price action and it’s why today’s move feels so deflating despite the stock posting a gain.

From here, we really need to keep an eye on two levels: $25 and $23.

On the upside, clearing $25 puts the stock over all the aforementioned moving averages and opens the door to $25.75 and the 21-day moving average. 

Above that could put $27 to $27.50 on the table.

On the downside, $23 is key. If shares break below that measure, it’s possible that we see more selling pressure, potentially down to the $21 level.

The Army contract is good news for Palantir, which to some degree makes this “sell the news” reaction even worse. We never like to see stocks go down on good news, especially as it fails at so many key technical levels.

Aggressive bulls can be long against $23, but a break of this level and failure to reclaim it means the bears are in control.