Hi Traders,
On a day when the whole board turns red, I stop watching the index.
I watch what still has a bid and what can't find one.
Wednesday gave me that kind of day. The Fed hiked, the Dow lost 1.2% and the S&P 500 dropped 0.45%.
Two charts stood out, and they're my love and my leave this week.
My favorite stock to trade higher this week is Palantir Technologies (PLTR).
It closed up 1% into Wednesday's selling, and it's gearing up for its next leg higher to the top of my pitchfork channel (three parallel trendlines that map where a stock should find buyers and sellers):
Wait for a close above the 20-day moving average at $175.66, then ride it up to $185.58.
The relative strength index held 50 and is moving higher, and MACD is getting less bearish (both measure whether a stock is gaining or losing steam).
Use a close back below the 20-day as your stop loss.
Palantir builds the software that lets a government agency or a big company pull its data into one place and put AI to work on it. It made its name with the Pentagon and the intelligence agencies. The faster growth is coming from corporate America.
Last quarter, revenue jumped 93 percent to $1.94 billion. U.S. commercial revenue grew 149% to $764 million, nearly catching the $809 million from U.S. government work. They signed 73 deals worth at least $10 million each and raised full-year revenue guidance by about half a billion dollars, to $8.15 billion.
Customers who are already in keep spending more: net dollar retention is 157% (existing customers spent 57% more than a year ago). UBS raised its target to $250 from $220 on Tuesday, and D.A. Davidson went to $250 last week.
Fast Food Leader Heading Lower
My favorite stock to hate on this week is McDonald's (MCD). It has traded straight down since March 2nd for almost a hundred bucks. The chart looks terrible, and it has another leg lower:
My target: the bottom of the pitchfork channel at $242.50.
Use a close back above the median line (the center line of the pitchfork, at $250) as your stop loss. RSI and MACD are both bearish.
You know the burgers.
The stock is a landlord business: franchisees run about 95% of the restaurants and pay McDonald's rent and royalties on every sale. That model throws off steady cash as long as people keep coming through the door.
It looks like that door is opening more slowly.
U.S. same-store sales grew 0.8% last quarter, down from 2.5% a year earlier, and the growth came from bigger checks. Guest counts fell.
CEO Chris Kempczinski told analysts, "We simply didn't execute at the level we needed to." He replaced the head of the U.S. business the same day and pushed the 50,000-restaurant goal back a year to 2028.
Since then, TD Cowen, Morgan Stanley and Deutsche Bank have cut their targets. The stock closed Wednesday around $248, a 52-week low, and it's the largest company in the S&P 500 sitting at one.
Both charts line up with where the spending is going.
Big companies keep signing larger AI contracts, and the customer at the drive-thru is cutting back.
The crew will go through everyone's loves and leaves on the Ticker Highlight Show and pick one option play for the week.
Tap this link to join us Monday at 10:30 AM ET.
Trade Accordingly,
Licia Leslie