Here’s How I’m Trading Palantir ($PLTR) (September 15, 2021)
PLTR
I want to look at Palantir ( NYSE: PLTR ) today. This is a stock that we have had on our Active Trade List for a while. Frankly, we are just a little bit above breakeven, which doesn’t make me happy but it doesn’t make me sad either because that’s just kind of the way trading works. I am just showing it to you because I think this is a pretty instructive chart.
There is a guy named Nicholas Darvas, known pretty extensively by anybody who has traded for any period of time with his Darvas boxes. This is something you can see on just about any stock that is even remotely looking like a trending stock. It is where a stock will be trading in a certain range, it is kind of in a box. And then it will break out, and then after the breakout then the stock starts to trade in another range, and then in another one. And now we are looking at potentially another one here. When you really think about it, just connect the lower right-hand corners of the boxes and that’s a trendline, and the same thing on the other side as well. At least that’s the way I look at this.
When I look at stocks in this context it really helps me have a better understanding of what’s happening with the stock because to put it in a really simple way, what it means is, that as a stock moves and soaks up, as the buyers soak up all of the supply at, say, $25.00, then ultimately the stock goes higher. And then that new level, where the stock broke out, that is now filled with people saying, crap, I missed it at $25.00. If it pulls back I am going to buy it. And then they buy it, that’s the bottom of the box. And so it’s just kind of a logical progression of how stocks trade.
I like these types of things, especially when they are stacked pretty close together and they are not high boxes. It’s not like you’ve got, well, this stock is in a box, it’s ranging between 30.00 and 60.00. How the heck are you going to trade something like that? You can trade it but how are you going to hold something like that? It is much better if you can be in a stock that is giving you some kind of sense of normalcy, some sense of predictability.
This is what I really see here with Palantir ( NYSE: PLTR ). The blue line is the 200-day moving average. So you see it’s still in definite IPO mode here. The 50-day moving average, that’s the red line, is starting to drift higher. The 200-day is up here so we’ve still got a little bit more work to do before the 50 will cross above the 200. Frankly, I don’t think it would do that for probably a couple of months even. But you are not making money on the moving average crossover, you are making money on the stock price.
The stock broke through 27.00 today. It looks to me like this could start into a 27-29 box. We are going to stay long this stock. We have a pretty loose stop on it clear down here. I had mentioned in our Strategy Session tonight, that I think you could buy the stock here. The stock is still buyable here only I wouldn’t want to give it this much room, 12 percent. I would say if I am buying the stock here I could even just say, do you know what? If it falls below today’s intraday low, which was $26.00, if it fell into the 25.00’s, I am out of here, I am taking my loss.
Or to give it a little bit more of a reasonable stop you look down at where the 200-day moving average is, which is the blue line there, and you say, if the stock falls below there, if it fell to 24.90, 24.95, that’s an 8 percent risk on this stock and that would be a good trade for me. That’s kind of a good risk/reward profile. Anyway, that is how I am trading Palantir ( NYSE: PLTR ) so check that out.
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