Palantir Stock Enters Danger Zone After Venezuela Operation Spurs Rally

My love for Palantir (PLTR)  is no secret. 

This name was my "Stock of the Year" for both 2024 and 2025 and I was well rewarded for having that opinion. The shares are rallying on Monday morning after selling off sharply on Friday. Why? Well, there has been no confirmation of any kind of involvement, but there is plenty of speculation out there that Palantir's platforms were used in this past Saturday's U.S. military operation inside of Venezuela.

The near precision of the operation and near-perfection in its outcome were seen by many as possible validation of Palantir Technologies' likely involvement. It's well known that, in addition to all that Palantir provides to its commercial clientele in the way of using artificial intelligence to refine its use of data analytics, the U.S. Department of Defense is a major client of Palantir's. And the firm does provide AI-infused, big-data-driven intelligence to U.S. special operators for use in targeting and timing. Sounds good. 

But is Palantir's share price in trouble? Hear me out.

Earnings 

Palantir is set to report the firm's fourth quarter financial results in very early February. Almost everyone I follow thinks that the firm will post a strong quarter. The question? Will the quarter be strong enough to sustain a 12-month forward-looking PE ratio of roughly 245 times? This is, at this point, not such an easy question to answer. 

Current consensus on Wall Street is for an adjusted EPS of $0.23 on revenue generation of roughly $1.34 billion. This would compare very well to the $0.14 per share reported for the same quarter one year ago, while sporting year-over-year sales growth of about 62%. A number like that would be in line with the pace of sales growth experienced during the previous quarter, which was for this firm a record pace. 

Even more impressively, of the 21 sell-side analysts that I know of that cover PLTR, all 21 have revised their earnings estimates higher since issuing their initial numbers. To be clear, we are pretty sure that performance is going to be superb. This is a question of sustaining an elevated valuation. 

Let's go to the chart:

Palantir Enters the Danger Zone​

Readers will see that the shares were set up for perhaps another bull run in mid-December after developing a cup-with-handle pattern with a $190 pivot. The stock did trade as high as $198 coming out of that formation. Then the breakout failed. Now, we're looking at something substantially more dangerous.​​

Since the last week of December, readers will see an all-around deterioration of technical conditions. The cup with handle transitioned into a rising-wedge pattern of bearish reversal. Over the past few days, the stock lost its 21-day EMA, forcing swing traders to act. Then, the stock lost its 50-day SMA. Losing that line likely compelled professional managers to reduce exposure, which is why Friday was so ugly. 

The thing is this: A level is never truly lost until contact is lost. Palantir did not lose contact with its 50-day SMA on the day despite suffering a 5.56% beating. Oddly enough, on Monday, even with the shares rallying 4.47% at the time of my writing this piece, it is technically imperative that PLTR renew contact with that thin blue line. 

In addition, relative strength has fallen through the neutral zone and is now overtly weak, even with the Monday rally. The daily MACD, below the chart, is in pretty tough shape as well. The histogram of the nine-day EMA has gone decisively negative as the 12-day EMA (black line) crossed below the 26-day EMA. 

These are short-term bearish signals. The 12-day line has already entered into negative territory and should the 26-day EMA do the same, the bearish signal emitted by this indicator would then be amplified.

I am not yet adjusting my $238 target price for PLTR, but if the stock does not retake its 50-day SMA and do that soon, I will be forced to not only adjust that target but also sell some shares.

At the time of publication, Guilfoyle was long PLTR equity.