Palantir (PLTR) Price Forecast: Reversal Zone Could Shape Next Trend

Failed Breakout Puts Pattern to the Test

The stock of Palantir Technologies Inc. (PLTR) broke out of an inverse head and shoulders pattern in late-May and quickly found resistance near a high of $163.70 on June 1. Resistance was seen at the confluence of several indicators, including the 200-day moving average, the 50% retracement of the prior decline, and a lower swing high at $162.40 from March.

The pullback that followed was persistent, with key potential support zones failing. PLTR dropped below the neckline of the inverse head and shoulders pattern and potential support near the 20-day and 50-day moving averages. Then on Tuesday, potential support near the right shoulder of the pattern at $128.75 was broken to the downside, further weakening the bullish breakout and placing the integrity of the pattern in question.

A slightly lower retracement low of $127.17 was reached on Thursday, as a support zone represented by the left shoulder at $126.23 continued to be tested. At Thursday’s low, PLTR had declined by 22.4% from the June 1 peak of $163.70. That decline is approaching the magnitude of the prior downswing, which began at a high of $162.40 and ended at $122.68. The low of that decline formed the head of the subsequent bullish reversal pattern. That earlier correction measured 24.5%, highlighting the similarity between the prior decline and the current retracement.

Pivotal Support Zone

As a result, PLTR is now in a pivotal area, as a sustained bullish reversal from current levels may establish a second right shoulder within a larger, more complex inverse head and shoulders pattern. Such a development will provide an early sign of renewed strength if support continues to hold.

Conversely, a decisive decline below the left shoulder would signal a possible continuation of the current downtrend and raise the risk of a test of support near the head of the pattern at $122.68. The current decline has found at least temporary support near the 88.6% Fibonacci retracement of the prior advance.

Recovery Signals to Watch

Signs of strength would suggest that support may hold and lead to a recovery. Tuesday’s high of $130.67 is near-term resistance and a move above that level would trigger a one-day bullish reversal signal. In addition, Wednesday formed an inside day with a high of $133.19. A breakout above $133.19 would provide another indication that bullish momentum is improving. An initial upside target would be the 200-day moving average, now at $160.57 and falling.

Before that objective can be challenged, however, PLTR would need to reclaim a resistance zone beginning near the 20-day moving average at $138.94 and the 50-day moving average at $139.97. Successfully regaining those levels would strengthen the case that the current support zone is holding and that the failed breakout discussed at the beginning of this analysis may be evolving into a larger bullish continuation pattern.