Has Palantir hit a technical roadblock?

Shares of Palantir Technologies Inc (NYSE: PLTR) have been on a tear over the past year with the stock almost doubling in that period. A significant amount of those gains came last month after the company reported better-than-expected results for the fourth quarter of 2023.

However, despite those substantial gains, the stock seems to have hit a roadblock in the past few days. Having hit a high of $27.28 on 8th March, the stock is down more than 10% since then though it still trades up 40% year-to-date.

On March 13, Palantir CEO, Alex Karp, was on CNBC where he lambasted short sellers shorting the company’s stock, saying:

“I love burning the short sellers. Almost nothing makes a human happier than taking the lines of cocaine away from these short sellers, who like, are going short on a truly great American company. Not just ours, but just love pulling down great American companies so they can pay for their coke.”

So, are short-sellers the reason the company’s stock has been down substantially in the last 10 days or there is more to it? Let’s find out.

Palantir became a publicly traded company on September 30, 2020, 17 years after it was founded in May 2023. Following the listing, Palantir’s stock saw a crazy bull run that lasted until January 2021 and saw it making a high of $45.

Following this rapid rise was a period of extended downturn that lasted until the start of 2023, marked by the bearish trendline in the chart, which saw the stock collapsing to a low of under $6.

In mid-2023, there was a notable shift in the stock’s trajectory. Palantir’s stock entered a bullish phase, coinciding with its 100-day moving average crossing over its 200-day moving average, indicating a potential reversal in the downward trend. This upward momentum pushed the stock to a recent high of $27.50.

PLTR chart by TradingView
However, even with this upward movement, there’s a particular price range that’s causing some trouble. Between $24 and $28, there’s what’s called a “supply zone.” This zone is where the stock faced a lot of resistance during most of 2021. It’s like a tough barrier that the stock finds hard to break through.

Now, the big question is whether the stock can break out of this supply zone. To find out, we need to look at shorter-term charts, which give us a closer look at recent price movements.

Examining the longer-term charts, it’s evident that the stock remains in an upward trend. It comfortably maintains its position above the long-term bullish trendline. Furthermore, the 100-day and 200-day moving averages, do not appear to be nearing convergence. However, the shorter-term chart paints a slightly different picture.

In the shorter-term 2-hour chart, Palantir’s stock has breached the lower band of the 50-period Donchian channel, signaling near-term weakness. Moreover, the 14-period RSI hasn’t ventured into the oversold level yet, which indicates that the bears are not exhausted yet.

PLTR chart by TradingView

Considering the conflicting signals emerging from longer-term and shorter-term charts here, the best play here for bulls is to sit back and do nothing until the short-term indicators again show strength.

Bears must watch the $22.2 level closely as it signifies a 38.2% Fibonacci retracement from the recent swing high of $27.5 and the stock can take support there.

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