Breaking Up With Palantir Is Hard to Do

Love hurts, love scars

Love wounds, and marks

Any heart, not tough

Or strong enough 

- Love Hurts, Nazareth

The classic rock song Love Hurts by Nazareth is 50 years old. Twenty-five years ago, as the dot-com bubble popped, investors’ hearts were broken if they held on too tight and too long.

With a nod to the band Foreigner, you can be Hot Blooded on Valentine's Day, but when it comes to the market, you’ve got to be Cold as Ice.

Just Don't Sell Us

In 1999, one of the hottest stocks in the market was JDS Uniphase, a Canadian-American fiber optics outfit..

That year, the Nasdaq Composite climbed 85.5%. It was the height of the dot-com bubble, and the tech-heavy index was rolling like a runaway train.

JDS Uniphase outperformed the Nasdaq by nearly tenfold, gaining 814% that year. Traders joked that JDSU stood for “Just Don’t Sell Us.”

Then the calendar turned to the year 2000, and the magic of 1999 was gone. JDSU shares declined sharply and never regained their footing. Now the stock’s symbol translated to “Just Don’t See Upside.”

The Cisco Kid

Traders fell in love with that stock, just like they fell in love with Cisco Systems  (CSCO) . Cisco was on the cutting edge of the internet revolution, just as companies began to establish their online presence.

The Cisco Kid gained 130% in 1999, and then began a dramatic multi-year decline.

Cisco would spend the next 25 years trying to break even. Last week, the stock finally climbed above its former all-time high, set in March of 2000. 

Breaking Up With Palantir

I know Palantir  (PLTR)  is a name that has been very good to many of us. In fact, I’d venture to say that some of us might be emotionally attached to the stock. Palantir climbed 136% last year, after a 340% gain in 2024.

We first recommended Palantir at $35 per share in September of 2024. Then we added more shares one month later, at $43. Our average cost is about $39, giving us a profit of 246%. 

Separately, we attempted a short-term Palantir trade in November that failed.

Don't Cry Because It's Over, Smile Because It Happened

Now it’s time to say goodbye.

Palantir has broken down from a large rounded top (shaded yellow), and has failed to climb back above a key former support level of $150 (black horizontal line). The stock is trading below its 50-day (blue) and 200-day (red) moving averages, which appear destined to cross.

In addition, a series of lower highs (LH) and lower lows (LL) is now visible. All of this is happening as the major indexes flirt with all-time highs. 

Bottom Line

Stocks are pieces of paper that are meant to be either flipped for a profit, or held for posterity. Either way, you can never allow emotions to cloud your judgement.

I frequently include 50-day and 200-day moving averages on my charts. These indicators can be used as warning signs. When a former high-flyer breaks them, especially while the broader market is strong, it might be time to break up with that stock. 

At the the time of publication, Ponsi had no positions in any securities mentioned.