The American software company headquartered in Denver, Colorado, that specializes in big data analytics, Palantir Technologies Inc. (NYSE: PLTR) seems to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Pennant Pattern Breakout: As seen from the daily chart, the stock was in an uptrend after which it started consolidating and was in a narrowing range. This is a classic pennant pattern and is marked in the chart in purple color. A pennant is a continuation pattern. Whenever a stock breaks out of the pennant pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the pennant pattern. This is a possible sign of an upcoming bullish move.
Daily Chart – PLTR
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#5 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines. The +DI line and the ADX line is also currently above the –DI line. This indicates possible bullishness.
#6 Above Resistance Area: The weekly chart shows that the stock is trading above a resistance area, which is marked as a pink color dotted line. This is a possible bullish sign.
Weekly Chart – PLTR
#7 Bullish ADX and DI: The weekly chart shows that the ADX line has currently moved up from below –DI and +DI lines. The +DI line and the ADX line is also currently above the –DI line. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal for PLTR is if the stock corrects to the breakout level of the pennant pattern, at around $26.50. However, for those with a higher risk appetite, you can purchase half the intended quantity of shares of PLTR above the price of $32.70.
TP: Our target prices are $35.00 and $38.00 based on the breakout from the pennant pattern.
SL: To limit risk, place a stop loss near $22.00 (for entry near $26.50) and $31.20 (for entry near $32.70). Note that this stop loss is on a closing basis.
Our target potential upside is 7% to 43% in the next 3-6 months.
- Entry near $26.50: For a risk of $4.50, the target rewards are $8.50 and $11.50. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry near $31.20: For a risk of $1.50, the target rewards are $2.30 and $5.30. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the pennant pattern breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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