BigBear.ai (BBAI) is showing early signs of setting up for another classic “buy the dip” opportunity. The stock has more than doubled over the past 11 trading days, fueled by growing speculation that BBAI could be the next Palantir in the AI-driven defense sector. With momentum cooling and technical support levels in play, active traders should be watching this setup closely.

What’s Behind the BigBear.ai Rally
The breakout began on June 24 when shares surged back above the key $5 level. For institutional traders, that threshold often acts as a re-engagement trigger—especially in speculative AI stocks like BigBear.ai. Volume surged, and options traders followed, positioning aggressively for more upside.

Then on July 1, BigBear.ai announced its involvement in the Capstone 5 experiment, a major multinational AI-driven defense exercise involving all branches of the U.S. military alongside key allies. The company’s sentiment analysis and forecasting platform was featured, aligning the narrative with defense AI applications that Palantir investors are already familiar with.

This announcement lit a fire under the stock, but technicals soon became stretched.

Short-Term Profit-Taking and Resistance
After testing the $8 level, shares pulled back nearly 10%, driven by round-number resistance and technically overbought conditions. This mirrors a similar pattern from February, when BBAI rallied from $5 to $10 on a Department of Defense contract announcement—only to get rejected and reverse lower as traders took profits and the company issued new shares to raise capital.

The current pullback is more orderly and may offer a second chance for those who missed the initial move.

Options Market Points to $10 Target
Call volume has been heavy during the rally, especially at the August $7 strike. Open interest continues to rise, suggesting bulls are positioning for a breakout to $10 in the coming weeks. That aligns with the stock’s past price behavior and reinforces the idea that we’re in a rising interest phase—not the tail end of a hype cycle.

A sustained push above $8 would confirm the next leg higher. Until then, technical levels will be key.

Technical Setup: Support at $7 and $6
BigBear.ai remains in a short-term bullish trend, with potential support at:

  • $7.00 – round-number support and high options activity
  • $6.00 – psychological round-number level and 30% correction zone from the highs
  • $5.60 – the stock’s 20-day moving average
  • $4.40 – the stock’s 50-day moving average

A break below $7 could trigger a fast drop to $6, but both levels should be seen as potential entry zones for long-term speculative buyers. The stock remains well above its rising 20-month moving average, signaling that the long-term bull trend remains intact.

The Bottom Line
BigBear.ai is pulling back after a strong run, but this doesn’t look like the end of the move. With clear institutional interest, heavy options activity, and long-term trend support, this dip may be the window active traders are looking for.

Watch $7 and $6 closely. If support holds, the next rally toward $10 could be just a few catalysts away.

— Chris Johnson

Former Wall Street Insider Calls This His Biggest Gold Play Yet [sponsor]
Karim Rahemtulla, the trader behind a 400% gain in 24-months on Rolls-Royce, has uncovered another potential multi-bagger. This under-$20 stock gives you exposure to over 1-oz of gold with the lowest production costs in the industry. And an upcoming announcement could send this stock soaring. Get Karim's urgent briefin - click here now.

Source: Money Morning