Wednesday was, well, a very strange trip for Palantir Technologies (PLTR) .
The shares opened at $123.86, rushed up to a 52-week high of $125.41 by late morning, and then suddenly nosedived, finishing down 10% to close at $112.06.
After hours, the selling continued, dropping the shares another 4.8% to $106.74.
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Two causes were cited for the abrupt selling.
- CEO Alex Karp had filed a notice he might sell 9.975 million shares over the next year. At Wednesday's regular close, the shares were valued at as much as $1.2 billion.
- Reports out of Washington Wednesday said the Trump administration was going lay off thousands of workers as the Department of Defense, a key Palantir customer, looked to trim costs.
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But there was probably more behind the selling, including that Palantir's shares had become way too pricey and were vulnerable to a selloff. At Tuesday's $124.52 close, the shares had risen 65% this year.
Thursday's market looks at risk
The Palantir selloff is its worst on a percentage basis since a 15.1% tumble in May 2024. It might affect markets on Thursday. Futures trading had the Standard & Poor's 500, the Dow and the Nasdaq-100 indexes opening lower on Thursday.
Stocks have risen 4% to 5% this year, but markets have found gains tougher to achieve, partly because of the Trump administration's tariff threats and campaign to cut government spending sharply.
The S&P 500 had closed at a 52-week high on Wednesday. So did the Nasdaq 100 Index. Palantir, which has a market capitalization of $262.8 billion, is a component of both indexes.
Palantir, founded in 2003 by Peter Thiel, Stephen Cohen and Karp, is in the data analysis business, and among its first customers was the U.S. government, looking for information to get ahead of terrorists and other issues of national security.
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About 55% of revenue still comes from U.S. and non-U.S. governmental entities, and the nongovernment sector is growing rapidly.
Denver-based Palantir, according to its 10-K filing with the Securities and Exchange Commission, has 711 customers and 3,936 full-time employees. Of that staff, 31% work outside the U.S.
The company will not do business in China or with Chinese companies.
The trio have been friends with Tesla (TSLA) CEO Elon Musk. Thiel is prominent in conservative circles.
Billings to its top 20 customers averaged $64.6 million in 2024, up 18.3% from a year earlier.
Revenue in 2024 was $2.87 billion, and net income was $466.9 million or 19 cents a share, up 29% from 2023.
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How to know whether Palantir is overbought
The selloff matters because the big share runup was too much.
The company's relative strength index has been above 80 since Feb. 4. RSI provides a snapshot of whether a stock or an index is rising too fast. A reading above 70 suggests the stock is rising too fast. Above 75, the stock is becoming vulnerable. Above 80 signals vulnerability.
A reading at 30 lower means a stock is oversold and may be ready to rebound.
Charting tools at many financial websites will let you see a stock's RSI at any given moment, including TheStreet's quote page. Simply go to the ticker page and scroll down to advanced charts, then click on indicators, lower indicators, and choose RSI.
Palantir has shown lots of RSI volatility in the last year. It topped 84 in November as stocks shot up after the Nov. 5 election. It slumped a little in early January and started a sharp move higher on Jan. 14.
When the stock closed at $124.62 on Tuesday, Palantir's RSI was 81 and ripe for selling.
The S&P 500 and Nasdaq are higher, but not showing signs of being overbought.
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