Buying Palantir as Deep Pullback Creates Trading Opportunity
I'm initiating a small position in the polarizing AI company as the market faces correction.
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The primary reason that bounces in a poor market tend to fail is because stuck bulls use the strength to reduce positions that have been causing them stress.
Over the past few years, there has been a greater inclination toward V-shaped bounces, mainly because of the action in the Magnificent Seven MAGS, but V-shaped bounces are the exception. Failed bounces are much more common. Typically, there will be a series of failed bounces during a market correction.
Buyers had a good reason to chase the open as both core and headline CPI were lower than expected. Much of that has to do with a reduction in travel, which isn’t ideal, but it does help reduce some of the worry about stagflation. There is still concern that inflation will prove to be sticky, especially with the added pressure of tariffs, but a lower-than-expected CPI is better than the alternative.
The opening gap was sold but there is some dip-buying action. The close will be particularly important, but news risk remains high, and chart patterns are poor.
On Wednesday morning, I started a very small position in Palantir Technologies PLTR, but I am waiting to add a little more on a pullback. Palantir is one of those stocks that everyone agrees is expensive, but market participants love the story and consistently create renewed momentum. It isn’t something that I won’t take large, but this deep pullback creates an interesting trading opportunity.
I continue to watch for a bottom in biotechnology names. I discussed Rocket Pharmaceuticals RCKT as one of my favorite names for 2025, but it is very out of favor, along with other gene therapy names, and continues to drift lower.
BMO Capital initiated RCKT with an outperform rating and a target price of $50 on Tuesday. That helped the stock for a few minutes on Thursday morning, but the open gap was sold along with the broad market.
Rocket is trading around $8.30, but it has 16 analysts following it with an average target price of $39.79. The high target is $55, and the low is $15. Sooner or later, there should be a catalyst that illustrates why analysts think this stock has so much potential.
Be careful out there. There is no good reason for the market to go straight up here, and there are plenty of folks who are inclined to sell into strength.
At the time of publication, DePorre was long PLTR and RCKT.
