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Should You Buy or Sell Palantir After Its Latest Deal?

Palantir stock jumps and then fades on Monday after announcing a new five-year, $89.9 million deal. Let's look at the stock's chart.

Shares of Palantir  (PLTR) - Get Palantir Technologies Inc. Class A Report were up on about 1.4% on the day, but have come well off the highs from earlier in the session.

Bulls bid the name higher after the company secured a five-year, $89.9 million deal with the National Nuclear Security Administration.

Initially, the news sent shares higher by almost 6%. The stock joined other headline-worthy names like GameStop  (GME) - Get GameStop Corporation Report and Tesla  (TSLA) - Get Tesla Inc. Report as a result of the rally.

Since the early-session highs though, the stock has faded and given up most of its gains.

With more companies and government agencies turning to technology to help solve their issues, Palantir has been in the spotlight since its public debut in September.

Shares have struggled since topping out in late January and have been under pressure since its lockup expiration in mid-February.

With the pop-and-fade action on Monday, let’s see how the charts are shaping up.

Trading Palantir

Daily chart of Palantir stock.

Daily chart of Palantir stock.

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Despite the morning momentum in Palantir stock, shares still remain trapped in a downtrend.

Downtrend resistance (blue line) remains intact, while the stock is being rejected by the 21-day moving average. Further, it didn’t have the strength to test its 10-week moving average, which is also acting as resistance.

On the plus side, it is holding up above the 10-day moving average and the key $21 level. However, bulls must keep an eye on the latter. If Palantir stock loses this level - which has the looks of a descending triangle, a bearish technical pattern - then it puts last month’s low in play at $20.18.

If Palantir loses $20 and cannot reclaim it, it could put a notable drop in play, potentially down to the $15 to $16 range.

On the upside, bulls really need to see Palantir stock take out the levels that rejected and/or have been weighing on the stock price over the last few months.

Specifically, those levels include the 10-week and 21-day moving averages and downtrend resistance.

If the stock can clear those marks, it quickly puts the 100-day moving average in play, followed by the March high, up $27.47. That level will likely be accompanied by a test of the 50-day moving average.

Above this area puts the gap-fill mark and key level of $31.25 on the table.