Palantir Technologies Inc (NYSE:PLTR) was spiking more than 6% higher on Thursday, attempting to break up from a bull flag pattern on the daily chart.
The bull flag pattern is created with a sharp rise higher forming the pole, which is then followed by a consolidation pattern that brings the stock lower between a channel with parallel lines or into a tightening triangle pattern.
- For bearish traders, the "trend is your friend" (until it's not) and the stock may continue downwards within the following channel for a short period of time. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
- Bullish traders will want to watch for a break up from the upper descending trendline of the flag formation, on high volume, for an entry. When a stock breaks up from a bull flag pattern, the measured move higher is equal to the length of the pole and should be added to the lowest price within the flag.
A bull flag is negated when a stock closes a trading day below the lower trendline of the flag pattern or if the flag falls more than 50% down the length of the pole.
Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
The Palantir Chart: Palantir’s bull flag was created between May 11 and Thursday, with the pole formed over the first three days of the time period and the flag created on the days that have followed.
On Thursday, Palantir was attempting to break up through the upper descending trendline of the flag but lower-than-average volume was giving the stock trouble.
- At press time, only about 16.3 million Palantir shares had exchanged hands compared to the 10-day average of 70.6 million. The lower-than-average volume may indicate the bull flag pattern isn’t being recognized yet but it’s also likely that the low volume is being caused by general investor weariness of the overall markets.
- If higher volume comes in and Palantir gains bullish momentum later on Thursday and on Friday, the measured move on the break from the bull flag is about 27%. This suggests Palantir could soar up toward the $11 level.
- Palantir is currently trading in a gap that was created on May 9 following a bearish reaction to its earnings print. The gap still exists up to the $9.42 level and because gaps fill about 90% of the time, it’s likely Palantir will fill the entirety of the empty trading range.
- Palantir has resistance above at $8.92 and $9.79 and support below at $6.44 and the psychologically important $5 level.
See Also: How to Read Candlestick Charts for Beginners
Photo: Ascannio via Shutterstock
