For those that want a quick synopsis of what I’m about to say — finally, did I hear some of you reply? — regarding Palantir Technologies (NYSE:PLTR) stock, I’m going with a common-sense approach.
There’s nothing groundbreaking here. If PLTR stock is down almost 14% year-to-date (and it’s only been less than two weeks into the new year), there’s probably a reason for it.
As I’ve mentioned in several similar scenarios where it appears a publicly traded security is entering a death spiral, that reason is usually not a good one.
Still, as humans (and particularly if you have a vested interest in PLTR stock), we want to have true confirmation regarding the trajectory of our investment decisions.
The not knowing and the what-ifs keep us awake at night. Therefore, we must have something other than reliance on potentially biased aphorisms like common sense.
So, it was interesting that BNK Invest brought to investors’ attention that PLTR stock is potentially oversold. Based on a reading of the relative strength indicator (RSI), the latest dips in the share price may set up a bullish reactionary move.
To be clear, that’s not what the article stated. However, the piece mentioned one of Warren Buffett’s favorite sayings, be fearful when others are greedy, and be greedy when others are fearful.
So, the implication is that you may want to consider being greedy with the RSI hitting significant lows.
The problem with this implied assessment is that the RSI isn’t always a reliable indicator. Just recently in early December, the indicator hit an even lower low. From then until the time of writing, PLTR dipped 15%.
So much for being greedy.
Go with the Obvious Indicator for PLTR Stock
To be fair, the early December oversold warning on the RSI did signal a near-term cessation of bearishness. The next day, shares popped up 3.5%, ironically on the anniversary of the Pearl Harbor attack. The following day, PLTR stock jumped again.
When considering the intra-day high of that rally against the closing price when the RSI flashed oversold, you could have accrued a maximum profit of nearly 7.2%.
Since we’re only talking about a few days’ worths of trading, that could be a lucrative move: if you’re a day or swing trader.
However, keep in mind that the Financial Industry Regulatory Authority strictly governs those who make multiple trades within a short defined period.
So unless you are a market professional or are willing to incur short-term capital gains taxes (I am not a financial advisor — please consult your financial advisor for details), wagering on PLTR stock based on the RSI isn’t always reliable.
Heck, when shares pinged overbought in the immediate aftermath of its initial public offering, PLTR stock still represented a viable buying opportunity up until late January 2021. Thus, the RSI can sometimes be unreliable to the downside and upside.
For me, I find using technical measures to grade an equity like Palantir to be paralysis by analysis.
You can always find a bull or bear argument if you dig deep into the minutia. Instead, it’s more helpful to look at the obvious: the people closest to PLTR stock want nothing to do with it.
The latest insider selling transaction occurred on Jan. 4 of this year. Alexander D. Moore, a director at Palantir, sold 33,000 shares at a price of $18.14.
You know the crazy thing? By selling then, he saved himself a loss of 12%.
The Thesis That Keeps on Giving
While I suspect a great many of you are tired of hearing me talk about the same thing about PLTR stock, the news cycle that keeps shoving this on my radar necessitates my tackling of it.
I sincerely apologize. I’d much rather talk about Bigfoot sightings but the market for that is…limited.
However, I am unashamed about bringing up the insider selling. I’ll keep talking about it in the next few days when PLTR stock pops up on the radar again. The reason is, sometimes, you must give credence to basic logical deductions.
Inarguably, the folks that know the Palantir business the best are the ones that have built this company from the ground up.
So if they don’t think it’s a great value when shares have dropped nearly 36% in the trailing year, what would make you suspect that you know the business better than the ones who run it?
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
