'Bull trap' catches Palantir as stock swings from record high to correction territory

[Financial News]  

Palantir, a leading artificial intelligence platform (AIP) company, fell more than 7% on the 16th (local time), entering correction territory. Its shares, which had hit a record high just a week earlier, on the 9th, quickly turned lower into a correction.
According to Yahoo Finance, Palantir lost $34 billion in market capitalization in a single day on the 16th (about 45 trillion won).
Palantir shares fell to the $186 range that day, down more than 10% from their all-time closing high of $209.00 on the 9th. A decline of 10% or more from a peak is classified as a correction, and a decline of 20% or more as a bear market.
Palantir's rally gathered momentum on the 8th, when it hit $204.44 intraday. It reached $212.94 intraday on the 9th (Friday), then soared to $212.94 on the 12th (Monday). The stock rose for three straight days.
On a closing-price basis, however, the stock reversed course and began to fall after hitting a record high on the 9th. It slid every day for the full week through the 16th, including five consecutive trading days.
This was a classic 'bull trap.' Investors who chased the stock after it broke above its previous high to the upside were caught in the trap and suffered losses. In terms of the bull market, this meant Palantir's breakout above its previous high was ultimately a false one.
Software stocks followed a similar path to Palantir that day. Early gains turned into a sharp decline.
Of the 45 software stocks tracked by Yahoo Finance, 43 fell, including 15 that plunged 5% or more. A total of $260 billion in market capitalization was wiped out, including about $83 billion from Microsoft (MS).
ServiceNow's early gain of nearly 4% turned into a plunge of more than 5%, while Salesforce's early rise of more than 2% reversed into a drop of around 3%. Twilio plunged by double digits, marking its worst single-day performance since August last year.
The iShares Expanded Tech-Software Sector ETF (IGV), a software exchange-traded fund (ETF), plunged nearly 5%, recording its biggest one-day decline since April. It also gave back all of its gains for the year.
The sharp reversal came as investors were beginning to warm to software stocks again.
Earlier, on the 12th, Bank of America (BofA) raised its rating on Salesforce by two notches, from 'Underperform (Sell)' to 'Buy,' and offered a rosy outlook. It said concerns that AI would eat into Salesforce's platform were exaggerated.
Analyst Tal Liani was optimistic, saying, "AI will actually strengthen reliance on the Salesforce platform," but market sentiment suddenly turned cold.
Meanwhile, cybersecurity companies have been struggling particularly this week.
The First Trust Nasdaq Cybersecurity ETF (CIBR) is down 10% for the week, while Palo Alto Networks and CrowdStrike have each posted weekly declines of 18%.

[email protected] Song Kyung-jae Reporter