Palantir Technologies (PLTR) Daily Chart Analysis: Head and Shoulders Pattern Emerges as Growth Projections Remain Strong
TLDR:
Palantir shows a potential head and shoulders top pattern on the daily chart with critical support at $85. Technical signals suggest a possible bearish move to $70, while fundamentals remain strong with 31.7% projected revenue growth for 2025. Recommended bearish trade: enter at $88, target $70, stop at $92 (1:4.5 risk-reward). Bullish alternative if $100 resistance breaks: enter at $102, target $115, stop at $98. Current analyst consensus: Hold, with mean price target of $86.61.
Technical Analysis
Chart Specifications
Daily chart of PLTR as of March 28, 2024, featuring 50-day SMA (red) and 200-day SMA (blue).
Current Market Structure
PLTR has been in a primary bullish trend since mid-2023 but is showing signs of potential reversal. The price currently sits at $85.85, below the 50-day SMA ($93.36) but above the 200-day SMA ($78.10), indicating short-term bearish momentum within a longer-term bullish framework. A concerning technical development is the potential "death cross" forming as the 50-day SMA approaches the 200-day SMA from above.
Chart Patterns and Implications
A head and shoulders top pattern has formed with:
- Left shoulder around $95
- Head at $100
- Right shoulder forming near $95
- Neckline support at approximately $85
This classic reversal pattern suggests potential downside if the neckline breaks. The measured move target would be approximately $70, calculated by projecting the distance from the head to the neckline.
Volume Analysis
Volume increased significantly at the $100 peak, indicating distribution, and has since decreased during the correction. This declining volume during price consolidation suggests a lack of conviction from both buyers and sellers, with potential for a significant move once direction is established.
Fundamental Analysis
Financial Health Assessment
Palantir maintains an exceptionally strong balance sheet with:
- $5.23 billion in total cash ($2.23 per share)
- Minimal debt of $239.2 million (debt-to-equity ratio of just 4.7%)
- Current ratio of 5.96 and quick ratio of 5.83, indicating excellent liquidity
- Free cash flow of $924.9 million
These metrics demonstrate Palantir's financial stability and ability to weather potential market downturns while continuing to invest in growth initiatives.
Growth Trajectory
Palantir's growth outlook remains robust:
- Revenue projected to grow 31.7% in 2025 to $3.77 billion
- Further acceleration to 26.9% growth in 2026, reaching $4.79 billion
- EPS expected to increase from $0.41 in 2024 to $0.56 in 2025 (36.2% growth) and $0.70 in 2026 (24.9% growth)
The company has consistently beaten earnings estimates, with a significant 23.7% positive surprise in the most recent quarter (Q4 2024), reporting $0.14 EPS versus $0.11 expected.
Analyst Sentiment
The current analyst consensus on PLTR is "Hold" with:
- Mean price target: $86.61
- Median price target: $91.12
- Range: $18 (low) to $125 (high)
- 21 analysts covering the stock
Notably, EPS revisions have been predominantly positive, with upward revisions across all timeframes, indicating improving sentiment among analysts regarding Palantir's profitability outlook.
Trade Scenarios
Bearish Case
- Entry Point: $88 (below recent consolidation)
- Target: $70 (previous support level and measured move target)
- Stop-Loss: $92 (above recent consolidation)
- Risk-to-Reward: 1:4.5
- Timeframe: 1-2 months
- Trigger: Confirmed break below $85 neckline with increased volume
- Strategy: Consider scaling into the position on breaks of key levels
Bullish Case
- Entry Point: $102 (above recent resistance)
- Target: $115 (previous high)
- Stop-Loss: $98 (below breakout level)
- Risk-to-Reward: 1:3.25
- Timeframe: 1-2 months
- Trigger: Break above $100 resistance with strong volume
- Strategy: Wait for confirmation of trend reversal with price closing above the 50-day SMA
Risk Factors
Technical Warning Signals
- The head and shoulders pattern could fail if price holds above the $85 neckline
- Death cross formation between 50-day and 200-day SMAs suggests potential for further downside
- Declining volume during consolidation indicates uncertainty
- Price remains below the 50-day SMA, maintaining short-term bearish bias
Fundamental Concerns
- Current P/E ratio remains elevated relative to broader market
- Operating margin is thin at just 1.33%, though improving
- High market expectations could lead to volatility if growth rates decelerate
- Technology sector rotation could impact valuation multiples
- Concentrated customer base remains a risk factor despite diversification efforts
Conclusion
Palantir presents an interesting case where technical signals suggest potential near-term weakness while fundamental growth metrics remain strong. The head and shoulders pattern on the daily chart indicates possible downside to $70 if the $85 neckline breaks, representing a compelling risk-reward setup for short-term traders.
However, the company's exceptional financial position, consistent earnings beats, and projected 30%+ revenue growth provide a strong fundamental foundation that could limit downside and eventually support higher prices. The analyst consensus price target of $86.61 aligns closely with current trading levels, suggesting the stock may be fairly valued at present.
For investors with different time horizons:
- Short-term traders should consider the bearish setup with entry at $88, targeting $70 with a stop at $92
- Medium-term investors should watch for a potential bullish reversal if price breaks above $100, with entry at $102 targeting $115
- Long-term investors may view any significant pullback toward $70 as a potential accumulation opportunity given the strong growth trajectory
The next earnings report will be critical in determining whether Palantir can maintain its growth momentum and support its current valuation.
Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. All trading and investment decisions should be made based on your own research, experience, and risk tolerance. Past performance is not indicative of future results. The author does not hold positions in the mentioned securities at the time of publication. This article was written with the help of AI models