Palantir Industries’ stock dropped another 5% at the close on Thursday marking a 15% decline from its all-time highs on Tuesday.
Shares traded as much as 12% lower through the day following news that the company’s CEO, Alex Karp, had made changes to his stock sales strategy for 2025. Karp plans to sell more than $1 billion in Palantir stock.
Investors have also been selling shares on the news that the Department of Defense will be submitting a plan to Congress aimed at cutting spending by 8% for each of the next five years.
Plans for the cuts were announced on Wednesday afternoon, triggering a 10% freefall for Palantir shares.
Investors took today’s drop as an opportunity to “buy the dip” in shares prices.
The stock found clear support as it reached the $100 price mark. That price marked a 20% decline from the stock’s highs earlier this week. Typically, a 20% decline in a stock or the market is considered a “healthy correction”, attracting buy the dip investors.
In Palantir’s case, the 20% drop erased only two weeks of progress since the stock had been on a 50% rally since the company’s latest earnings results which were released on February 3 after the close.
In all, shares remain 40% higher year-to-date as investors continue to see this stock as an undervalued issue given Palantir’s strong growth in business over the last year.
Still, the stock is likely to continue with a volatile tone over the next 2-3 weeks as details regarding the Department of Defense’s budget. Initial budget figures are set to be submitted early next week.
Investors will want to maintain a vigil eye on the $100 price level in the coming weeks. This round-numbered support level helped the stock as early as last week ahead of the move to new highs.
Failure of Palantir shares to hold $100 in the coming days will result in heavier selling pressure as short-term traders use the “signal” to take further profits on what is the best performing stock in the S&P 500 and Nasdaq 100 indexes.
Technical support is likely to present itself at $85.
This price represents both the price of the stock ahead of its latest earnings report AND its bullish 50-day moving average.
The combination of these technical features will likely trigger a massive buy the dip rally.
Shares of Palantir remain in a long-term bull market trend with a price target of $150.
— Chris Johnson
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Source: Money Morning
