Palantir Technologies, Inc (NYSE:PLTR) was falling slightly Monday after a 10% retracement between Tuesday and Friday last week dropped the stock from its 52-week high of $21.85.

The big data analytics company has surged over the course of November, gaining about 30% since Oct. 31 due to a heightened level of interest in the AI sector and Palantir’s announcement that it has secured a seven-year contract with the U.K.'s National Health Service to overhaul its software systems.

Palantir also printed a third-quarter earnings beat on Nov. 2, causing bullish sentiment to return to the stock.

Although Palantir retraced following the multi-week run higher, the pullback was needed because the stock’s relative strength index (RSI) had reached overbought territory. When a stock enters overbought territory, it signals the security's price is elevated to its intrinsic value, which can signal a reversal to the downside on the horizon.

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The Palantir Chart: Palantir was working to form its second consecutive doji candlestick on Monday, which could indicate the local bottom has occurred, and the stock will rise on Tuesday. If that happens, Palantir will regain the eight-day exponential moving average (EMA), which would give bullish traders more confidence going forward.

• Although Palantir negated its uptrend on Friday by printing a lower low, the stock hasn’t yet confirmed a new downtrend with the formation of a lower high. Bullish traders want to see the stock surge up above the 52-week-high, which could indicate the recent retracement was a bear trap.
• Bearish traders want to see Palantir reject the eight-day EMA and then for big bearish volume to come in and drop Palantir down toward the 50-day simple moving average, which would put the stock in danger of filling a lower gap. The gap exists between $14.96 and $17.21 and the empty range has about a 90% chance of being filled at some point in the future.
• Palantir has resistance above at $19.95 and at $21.09 and support below at $17.84 and at $16.29.

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