There’s being right and then there’s been Palantir Technologies (NYSE:PLTR). But for tomorrow’s investors, today is increasingly shaping up as a big-time opportunity to buy shares with more confidence. Let’s look at what’s happening off and on the price chart of PLTR stock, then offer a risk-adjusted determination aligned with those findings.
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The big data operatives’ shares have been all-over-the-map since going public last fall. Some bullish Palantir investors were up as much as 65%. Yet other PLTR stock bears enjoyed similar gains of 62%. Timing is everything, but that type of precision is also elusive.
And make no mistake, with shares off a much more modest 7% and caught in the middle of a trading range that’s lasted for the better part of PLTR’s life as a publicly traded company, the price action has frustrated advocates and critics alike.
So, what’s driving investors and the volatile tit-for-tat behavior in PLTR stock?
Could Conditions Favor PLTR Stock Bears?
Bears might direct others toward Exhibit A and Palantir’s mounting losses. In May that amounted to a GAAP shortfall in excess of $123 million for the first quarter and more than double 2020’s near-$55 million loss. That can’t go on forever, right? And while PLTR is new to the secondary market, the Denver-based outfit has been around since 2003.
Even investors gung-ho on Palantir’s across-the-board earnings beat and positive on PLTR’s longer-term growth prospects are monitoring the tech firm’s real world, red ink carefully.
InvestorPlace’s Alex Sirois does a nice job discussing why eye candy sales growth forecast at 30% through 2025 could quickly become too sweet for investors’ well-being if growing net losses and PLTR’s cost of revenue aren’t curtailed.
Some clarity on that front is expected when PLTR reports its Q2 results in the first-half of August.
Doubters, and not to be dismissed, have also enjoyed a more challenging environment in 2022 for growth stocks of PLTR’s caliber. Plain and simple, multiple compression amid interest rate and inflation worries plus fears of stalling economic growth have been a condition favoring bears.
And since February’s initial dislocation as investors exited growth narratives in favor of value-oriented cyclical stocks, it’s largely hurt. From a diversified A to Z or rather stocks like Airbnb (NASDAQ:ABNB) to Zoom Video (NASDAQ:ZM), if misery likes company PLTR stock has plenty of it.
PLTR Stock Weekly Price Chart
Make no mistake, up-and-coming growth narratives such as PLTR stock have taken it on the chin. More broadly, evidence of that can be found in products such as the Innovator ETFs Trust – Innovator IBD 50 ETF (NYSEARCA:FFTY) and last year’s wunderkind growth fund ARK Innovation ETF (NYSEARCA:ARKK).
The high-profile, growth-centric funds have remained largely disconnected from today’s blue-chip market story sitting near all-time-highs and up double-digits on the year. Today, though, I’m optimistic the market’s red-headed stepsister has seen its best days. And for bulls in PLTR that’s shaping up nicely on the price chart.
Technically, Palantir shares have put together a fourth-straight week of lower-lows that’s challenging zone support in-between PLTR’s 62% and 76% retracement levels.
Relative to May’s year-to-date pivot and given generally favorable volume indications since topping in January, the observation is PLTR stock is setting up to rally into the right side of a large cup or saucer-shaped base. To maintain the pattern’s bullish structure shares need to bottom shortly and hold the support area. That could come as early as next week on a confirmed reversal candlestick.
Should PLTR shares begin to rally, the first logical test which also improves the base’s durability is a test of the 50% retracement line following June’s retreat from the 38% resistance level. That’s offers roughly $9 of minimum upside profit and possibly a great deal more over time.
Relative to the technical risk, Palantir offers an attractive buying opportunity. And with earnings in August, a purchase could enjoy faster-than-normal gratification.
Still and for investors wanting to preserve and smartly grow their own bottom-lines over time, I’d suggest a fully-hedged September-dated collar or bull call spread as better strategies to deploy over a standalone PLTR stock position.
On the date of publication, Chris Tyler and/or accounts under management, held long positions in Palantir (PLTR), ARK Innovations ETF (ARKK) and their derivatives. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is strictly intended for educational purposes only. The use of this content is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.