Sticking to This Palantir Price Target With Quicksand Ahead

Show of hands: How many of you actually read my "Palantir Warning" segment on October 16 (Last Thursday) when I pinch hit for Doug at his Diary? 

Well, it matters now. More on that in a minute. First some housekeeping items, as I do not have a diary like the one mentioned above. 

Readers should know that I have been active this week. I was fortunate enough on Monday and Tuesday to take profits and exit (at least for now) my long positions in Quantum Computing (QUBT)  and D-Wave Quantum (QBTS) , as well as Oklo (OKLO) . That said, I am not completely out of the quantum computing space completely.

I have used this sell-off to increase my exposure to Churchill Capital X (CCCX), which is the SPAC that will merge with Infleqtion. As far as OKLO is concerned, I think it's quite obvious that smaller nuclear reactors are the way to go on producing clean energy at scale and I do intend to re-enter that name at some point. It's just kind of hard to stay long a highly priced stock representing ownership in a company with no revenue as it sells off. I had to get out before I had to worry about not turning a profit. 

Oh, and it's not a "Stocks Under $10" stock, but readers should know that I have acted on my earlier price and have initiated a long position in Netflix (NFLX)  on this weakness.

Palantir To Report

Be fully cognizant that Palantir Technologies (PLTR)  will report the firm's third quarter financial results after the closing bell on Monday, November 3. Currently, Wall Street is looking for an adjusted EPS of $0.17 on revenue of roughly $1.1 billion. This would compare well to the print of $0.10 from the year-ago period, while reflecting year-over-year sales growth of 50.5%.

This will be the fastest pace of annual revenue growth that Palantir has ever posted for any single quarter and also the eight consecutive quarters of accelerating year-over-year growth from the quarter prior. Of the 21 sell-side analysts that I know of that cover PLTR, 19 have revised their earnings estimates higher since the start of the period. None have revised those estimates lower, while two estimates have been left unchanged.

Alert!​

Be aware. ​I still believe in Palantir, and I still think Alex Karp is about as sharp as CEOs get. That said, the stock still trades at 218-times forward looking earnings and technically, the stock is standing next to quicksand. For those of you who have never seen a man disappear under quicksand, it's not slow in the movies. My point man disappeared in a flash on patrol in Panama when I was a kid. Yes, we saved him, or more correctly, Lance Corporal Dixon, who had been an NFL offensive lineman saved him (good thing Dixon was gigantic), but that did scare the crap out of me. Palantir could do that, too.

Readers will see that support for the stock showed up at a 38.2% Fibonacci retracement of the April through September rally. I once thought we had a cup-with-handle pattern percolating here. That would have been bullish. I do not see it anymore. What do you see now?

Looks like a fairly well-defined double top pattern of bearish reversal, doesn't it? Except that the final leg has kind of fanned out. The stock has not broken the 50-day SMA, but it has pierced the 21-day EMA a number of times as swing traders are using that line to make some cash on both sides.

The problem is this:

Should PLTR lose that 50-day SMA — not just a piercing, but lose contact — portfolio managers will be forced to take profits by their risk managers. Too many professionals have too much of their annual tied up in maintaining what are huge profits in this name. That line cracks, they will bail, and to some degree, so shall I. 

The pivot for the double top is $142. The 200-day SMA is down at $128. These are the levels that the algorithms that run the show will shoot for should the pros I am talking about step into that quicksand.

In the meantime, I am willing to buy shares at the 50-day SMA for a short-term trade outside of my core position.

My $218 target price stands, for now.

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