Palantir Technologies (NYSE:PLTR) stock’s been called a risky bet. But with some players on Wall Street still spied betting aggressively on PLTR stock following a recent earnings sell-off, it may be time for investors to consider some bullish spycraft operations of their own. Let me explain.
“A casino” — that’s what notorious short seller Citron Research called PLTR late last year. And that bearish wager on red has turned green in the P&L column for the first time in a long while after last week’s less-than-well-received earnings announcement from the clandestine big data operative. But could the selling pressure be a case of short-term mistaken identity? It’s quite possible.
The gathering of standard surveillance shows PLTR shares slumping nearly 13% in the immediate aftermath of the company’s Q3 results. That’s not good, right? Worse, the selling pressure also improved upon the stock’s existing correction with shares off 40% from late January’s all-time-high.
There must be something truly sinister about Palantir, right? Maybe not.
PLTR Stock Pressured By Losses
In a nutshell, investors pressured PLTR stock over worries of continued slightly larger losses. But those concerns appear to ignore Palantir’s solid revenue gains of 40%, improving margins and considerable growth in its non-government, private-sector business. The exodus also overlooked that a fair chunk of the earnings miss was the result of stock-based compensation prevalent in younger companies of Palantir’s caliber.
But Palantir report’s underlying bullish underpinnings weren’t lost on everyone. The savvy and outspoken Cathie Wood, founder of 2020’s top performing Ark Invest funds, was spied aggressively buying PLTR stock on weakness in the days following the report.
Specifically, the firm’s flagship ARK Innovation ETF (NYSEARCA:ARKK) which surged nearly 150% in 2020 on the back of heavily weighted wagers in Tesla (NASDAQ:TSLA), Square (NYSE:SQ) and Teladoc (NYSE:TDOC), purchased more than 5.25 million PLTR shares on Feb. 18. The substantial buying also followed the acquisition of 1.56 million in Palantir stock for the ARK Next-Generation Internet ETF (NYSEARCA:ARKW) on Feb. 16. And combined, the buying totaled a whopping, near $200 million in new commitments to PLTR.
PLTR Stock Daily Price Chart
Source: Charts by TradingView
So, who are you going to believe? The bears or the bulls in PLTR stock? Given ARK’s well-recognized transparency and terrific track record, as well as a couple visible positive supports on the price chart, it’s our view long exposure in Palantir shares looks compelling.
Technically, and to be fair, buying PLTR today isn’t perfect and gaining upside traction may have its work cut out for it. In the wake of earnings, shares have broken channel support and subsequently failed against the prior pattern activity in its new role as resistance. It’s a bit unsettling. So are a couple notable failures of key Fibonacci levels tied to PLTR’s all-time October and 2021 low water marks. Still, don’t make the mistake of calling PLTR a broken stock.
The fact is all stocks correct. And in general, after a sizable rally the odds of this type of price behavior occurring increases. Still, given a fairly brisk 425%-plus return in less than five months, PLTR’s correction shouldn’t be entirely surprising. And today, Palantir’s slightly larger than normal 40% decline sets shares up as an opportunity to buy growth at a sizable discount.
Stealth Accumulations Seen
What’s also catching our eye is PLTR stock’s continued heavy buying in the face of the sell-off. It’s much bigger than just Cathie Wood and her ARK funds buying shares on weakness. It’s indicative of stealth accumulation by other large interests which should act as durable support for PLTR stock. Also, while some lines of technical defense have failed, other price supports still exist on the price chart. Currently, shares are wedged in-between the 50% and 62% retracement levels. PLTR stock is also in a testing position of January’s massive breakout from a triangle consolidation pattern.
Bottom-line, pick a side in Palantir Technologies. If that results in joining the bull camp, you’re in good company. Still, I’d smartly suggest a slightly covert PLTR stock purchase. To that end, a well-placed, adjustable and risk crusading April $23/$35 collar strategy, when hostile enemy forces are everywhere, looks about right in our estimation.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.