Why I’m Buying More Palantir at All-Time Highs

I'm leaning into the 'parabolic' Palantir buying frenzy and adding to my position. Here's why that makes sense.

Author:
Ed Ponsi
Publish date:
Oct 10, 2024 9:45 AM EDT

Palantir (PLTR) is having an outstanding week. The stock climbed 6.6% on Tuesday, followed by a 4% gain on Wednesday. Palantir has gained 18% since our September 17 article, which described the company’s co-founder, Alex Karp, as the next "rock star" CEO.

The stock closed at an all-time high of $43.13 on Wednesday. Palantir has gained 160% year-to-date and 368% since going public in October 2020.

Technically, Palantir is forming an accelerating curve. Traders often refer to this as a "parabolic curve" (black dotted line). In this case, the curvature of the chart closely matches the stock’s 50-day moving average (blue).

When I see this type of accelerating curve, terms like "panic buying" and "euphoria" enter my mind. Traders are climbing over each other to own this stock.

I’ve decided to lean into the frenzy and add to my Palantir position, despite the fact that the stock is trading at an all-time high.

It's a strong stock in a strong market. The S&P 500 also closed at an all-time high on Wednesday.

At the bottom of this chart, Palantir’s RSI (relative strength index) of 77 reveals a stock that is overbought. Any RSI reading above 70 places a stock firmly into the overbought camp.

This fact doesn’t discourage me at all. Upon closer inspection, Palantir was overbought for most of September, and this did nothing to slow the stock’s ascent.

Note that the shape on this chart doesn’t fit the literal definition of a parabolic curve. Traders have their own language, and it’s not always meant to be taken literally. For example, when a trader uses the term "dead cat bounce," it's understood that no cats have been harmed.

Many folks find it difficult to explain, or even understand, exactly what Palantir does, and what sets it apart.

Think of Palantir as an efficiency provider. Palantir creates data analytics software that allows companies to operate with efficiency, which boosts productivity. In this sense, an investment in Palantir can pay for itself.

Companies in various industries, such as Morgan Stanley (MS) , Airbus (EADSY) , and Merck (MRK) , are users of Palantir software, but the company’s biggest client is the U.S. government. The FBI, CIA and other U.S. agencies use Palantir to work together and streamline their operations.

Palantir is scheduled to report earnings after the close on November 4.