Palantir (NYSE:PLTR) has been a tough stock to own over the past few months. While PLTR stock has been struggling, it’s important to note that almost all growth stocks have been struggling.

The group has seen so much volatility, both pertaining to the stock prices and the underlying businesses. Many companies saw an explosion in sales as the novel coronavirus swept around the world.

As we wane off of that growth though, investors are struggling to value the businesses. They struggled on the way up and now they’re struggling on the way down. 

It doesn’t help that PLTR stock and others have had huge periods of runaway momentum. That creates the “blowoff” top look and unfortunately — like in February — and many times it has been accompanied by “meme stock” rallies. 

While a good meme run is always fun for the bulls, we have to remember the pain that follows in the violent selloffs.

Let’s dig into Palantir and see if there’s anything here for investors. First, let’s start with the stock’s charts.

What the Charts Say for PLTR Stock

In July, Palantir stock dipped below the key $21 level. This level has been support for most of the year, save for the short-lived breakdown in early May as growth stocks were hitting a bear-market bottom. 

After reclaiming its key moving averages in August, PLTR stock made a strong push higher. Amid that push, we saw a quarter-up rotation over the Q2 highs. 

However, five straight down days and a near-20% skid as shares fell in six out of seven sessions in late September dealt a blow to the bull case. That sent PLTR stock back below all of its key moving averages, as $23 became support.

We have some interesting observations in play now. 

While the stock was recently rejected from the underside of prior uptrend support (blue line), bulls can stay long Palantir so long as it’s above all of its major moving averages. Although we haven’t seen a long-lasting uptrend in this stock in quite a while, above the key moving averages is important for the bulls. 

If we can get a breakout over the $26.75 area, it’s possible that we see a push up to the recent highs near $29. Above that and the gap-fill at $31.34 is possible. 

On the flip side, a move below $24.50 puts PLTR stock below all of its major daily moving averages. That could put recent support in play near $23, followed by strong support at $21. 

Earnings are likely to be a big mover, which are due up on Tuesday before the open. If you are trading this name (rather than investing in it), that is something to keep in mind.

Breaking Down Palantir

Obviously investors want to own PLTR stock for its potential growth. This week we should get a look at how management expects the rest of its fiscal year to go. On the plus side, Palantir shouldn’t be struggling from all the supply chain related issues that most other companies are. 

Obviously automakers, industrial companies and retailers are having troubles. But so too are well-known tech companies like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN). 

Software and security firms are not having those problems and so there is hope that Palantir can become one of the outperforming growth stocks to watch. When we look at the numbers, there is both good news and bad news.

The good news? Growth remains strong. 

Analysts expect 38% growth this year, while trailing growth sits at almost 50%. Going forward, consensus expectations call for more than 30% annual revenue growth in each of the next 2 years. That’s excellent!

What’s not excellent is Palantir’s valuation. 

PLTR stock trades at 33.5 times this year’s revenue estimates and almost 26 times 2022 expectations. That’s not cheap and while there are times we can disregard the valuation during a surging bull market, we’re not seeing that type of exuberance in growth stocks. 

Again, the exception here is earnings. If Palantir reports better-than-expected growth and issues strong guidance, the market will likely reward it. That’s particularly true if it can show it’s one of the few growth stocks that is delivering right now. If it’s not rewarded on strong results and an upbeat outlook, bulls will have a problem on their hands. 

If it fails to deliver though, its valuation will be an issue. 

On the date of publication, Bret Kenwell 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.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.