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Palantir Stock Holds Key Support — for Now

Palantir stock is getting hit hard for a second day -- but it's not trading into a key support level.

It has not been a good two-day stretch for Palantir  (PLTR) - Get Palantir Technologies Report. The stock is down 14% in that stretch since the data-analytics-software company reported earnings.

The Denver company reported its third-quarter earnings before the open on Tuesday, finishing lower by almost 10% on the day after an in-line earnings result and a beat on revenue expectations.

The decline also comes despite Palantir’s better-than-expected outlook for next quarter.

The results have caused several analysts to issue downgrades and price target cuts.

But as we have been saying since October, growth stocks simply are not in favor among investors. 

Except for phenomenal results — like those we saw from Trade Desk  (TTD) - Get Trade Desk, Inc. Class A Report — these stocks simply aren’t being rewarded for their results.

With Wednesday's 5% drop, Palantir shares are now testing into a key support level.

Trading Palantir Stock

Daily chart of Palantir stock.

Daily chart of Palantir stock.

The post-earnings dip sent the shares tumbling below all the major daily moving averages. Palantir stock cut below the 10-day, 21-day, 50-day and 200-day moving averages on Tuesday. 

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That’s what I refer to as intentional price action.

In other words, the market intentionally pushed the stock below all these key measures. That made it a no-touch setup for most bulls.

Today’s follow-through price action is not that surprising and, to be honest, it’s actually a good thing.

That’s because it drove Palantir stock down to the key support level at $23.02 — or $23 if you prefer. 

Even better, the stock broke below this measure, bottomed at $22.76, then reclaimed $23.02, which is also the October low. 

Aggressive traders can be long from $23.02 with a stop-loss just below today’s low. A close above $23.02 could set up the stock for a bounce in the coming days.

It’s a low-risk setup because we’re risking only about 30 cents a share.

Should Palantir stock continue lower and take out the low, we’ll have to see if it can reclaim $23 or if lower prices are in order.

If it’s the latter, let’s see if the shares test down into the $21 level. With the exception of early May, when the bear market was coming to an end, this level has been solid support for the stock.