Palantir Technologies (PLTR) stock continued its sharp decline on Tuesday, extending a steep drop from recent record highs. The downturn follows concerns that potential U.S. government budget cuts, particularly to the defense sector, could negatively affect Palantir’s contracts with the military.
Since hitting a record high last Wednesday, Palantir shares have fallen nearly 30%, largely due to reports that Pentagon officials have been directed to reduce the U.S. defense budget by 8% annually over the next five years. This proposed cut could impact key contractors like Palantir, which provides analytical software services to defense agencies.
However, some analysts view the sell-off as a “buy-the-dip” opportunity, citing the company’s role in the federal government’s push to enhance efficiency across its agencies. Despite the recent losses, Palantir’s stock is still up 17% year-to-date and has increased by roughly four times over the past 12 months.
As of recent trading, Palantir shares were down about 3%, hovering around $88, following a more than 10% drop on Monday.
Technical Analysis: Key Levels to Watch
The stock has faced accelerating selling momentum since a bearish engulfing pattern appeared at its record high earlier this month. A sharp decline followed, with the stock now at risk of closing the gap formed after its February earnings report.
Rising trading volume during the recent sell-off signals growing selling conviction, and the Relative Strength Index (RSI) has dropped from overbought territory to below 50, confirming the increasing bearish momentum.
Support Levels to Monitor
$85 Support Zone: The first level to watch is around $85. A pullback to this area could trigger buying interest near the 50-day moving average, as well as the late-December peak.
$66 Support Zone: If the stock falls below $85, the next potential support area lies around $66. This region aligns with the January low and the top of a pennant pattern formed in late November.
$44 Support Zone: A more significant drop could push the stock toward $44, where buying interest may emerge near the upper range of a consolidation period that occurred in October.
Overhead Resistance Levels
For any potential recovery, investors should closely watch the following levels:
$100 Resistance Zone: The $100 area will be critical during a rebound, as it aligns with the psychological round number and the low from the breakaway gap earlier this month. If the stock reclaims this level, it could signal further upside.
$125 Resistance Zone: A successful recovery above $100 could bring the stock back toward $125, a level where profit-taking might occur, particularly as Palantir approaches its all-time high.
As Palantir continues to navigate concerns around U.S. defense budget cuts and broader market sentiment, these technical levels will be key indicators for traders looking to gauge the stock’s next move.
