Traditional equity trading methods have changed post pandemic. There is a new style that makes it harder to have conviction in certain stocks, such as Palantir (NYSE:PLTR) and PLTR stock.
This new breed trades from groups on social media. GameStop (NYSE:GME) made them famous, but they have since added many other tickers like Clover Health (NASDAQ:CLOV). They rely heavily on causing mega squeezes. This has also taken effect on a few great companies like Palantir. PLTR stock now carries the potential of blasting off without warning.
This is unfortunate because I like the company’s prospects in the long term. This is a bankable team that deserves recognition for its own merits. Instead, it’s a Reddit stock for now, which adds unnecessary volatility.
These short-term shenanigans add a layer of gambling. In reality, the fundamentals of PLTR stock are rock solid. The company is still growing, so it is expensive from the traditional perspective. That doesn’t bother me in a stock at this stage of development.
Own PLTR Stock for the Long Haul
Palantir is a budding business trying to establish itself for the next decade. The company focuses on empowering teams by using artificial intelligence to make better decisions and faster.
Most businesses are now more digital than ever. If not, they are striving to be. Consequently, there is a flood of data just waiting to be mined. This is where Palantir comes in, because they aggregate the information and make it productive for its owners.
This may seem like a luxury now, but in the future it will be a must. Companies that do not utilize such services will be behind the ball and at a disadvantage. Palantir is not alone, but the field is still young enough that the company holds an early mover advantage.
There is an age-old debate about whether it’s better to invest or trade. PLTR stock is where that line is murky. It is worthy of a long-term thesis, but is acting like a wild short-term mover. I was lucky enough to be long it before the January spike when it soared 75% in under a week. I had to book profits even though I liked it for the long term. The rally was so ferocious that it delivered way too much too quickly. My decision was solid because it gave it all back up and then some.
Trade Palantir in the Meantime
I have covered this stock many times over. Most recently I wrote positively about its long-term prospects at the end of May. I feel compelled to write about it now because it rallied 20% and failed at $27.50. This is important as that is the second such failure since March and at exactly the same level.
Last week’s pullback could be part of bullish price action for a great opportunity. The bulls still have the chance to rally back and finally take out that June 25 double top. If that happens then there should be 25% of short-term profits from PLTR stock.
There in lies today’s conclusion, which is to buy the stock on dips. This is still a bullish market until the Federal Reserve flips its policy to tightening. Meanwhile, the bulls are in charge as we saw last week. The indices refuse to fall and the S&P 500 is setting daily records. Today it can even break a record on that stat, too.
Under normal circumstances, I would take positions in size when I have conviction. However, given that we have short-term extrinsic risk from so many global factors, humility is important. No one should have absolute confidence in anything right now. Investors should only take partial positions.
The Palantir team appears up to the task in the long run. Until they show weaknesses, they deserve the benefit of the doubt.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.
