How to know whether Palantir is overbought

How to know whether Palantir is overbought

The selloff matters because the big share runup was too much. 

The company's relative strength index has been above 80 since Feb. 4. RSI provides a snapshot of whether a stock or an index is rising too fast. A reading above 70 suggests the stock is rising too fast. Above 75, the stock is becoming vulnerable. Above 80 signals vulnerability. 

A reading at 30 lower means a stock is oversold and may be ready to rebound.

Charting tools at many financial websites will let you see a stock's RSI at any given moment, including TheStreet's quote page. Simply go to the ticker page and scroll down to advanced charts, then click on indicators, lower indicators, and choose RSI.

Palantir has shown lots of RSI volatility in the last year. It topped 84 in November as stocks shot up after the Nov. 5 election. It slumped a little in early January and started a sharp move higher on Jan. 14. 

When the stock closed at $124.62 on Tuesday, Palantir's RSI was 81 and ripe for selling. 

The S&P 500 and Nasdaq are higher, but not showing signs of being overbought.