Shares of AI service company Bigbear.ai (BBAI) dropped another 12% on Monday, finishing a 40% decline from last week’s closing highs.
Like Palantir (PLTR), BigBear.ai specializes in artificial intelligence and data analytics, focusing on predictive and prescriptive solutions.
Bigbear.ai serves mainly government and defense sectors, enhancing decision-making with AI-driven tools. Their offerings help manage and interpret complex data, aiming to improve operational efficiency and strategic outcomes.
Shares of BBAI have dropped in tandem with Palantir over the last week following news that the Department of Defense would be seeking to cut 8% of its annual budget each of the next five years.
Companies like BBAI and Palantir have seen dramatic gains as the AI revolution turns to AI service companies. Also included in that AI Services lineup are IBM (IBM), SalesForce.com (CRM) and ServiceNow (NOW).
Year-to-date, Bigbear.ai shares are trading at the top of the group as investors recently discovered the company as a low-dollar competitor with larger upside potential for growth.
As a quick comparison… at its current priceBigBear.ai, currently reflects a sales-to-price ratio of 9.2. That compares to the ratio for Palantir of more than 90. The relatively lower valuation from the market has been identified by some as an opportunity to leverage the movement to AI services stocks with Bigbear.ai.
From a technical perspective, BBAI stock is nearing two price levels that may provide technical support.
First, following today’s break below its 20-day moving average – referred to as the “Trader’s Trendline” – BBAI shares are finding support at the round-numbered $6.
It is common for stocks that are price between $5 and $10 to find support and resistance at round numbered prices due to a psychological phenomenon related to investor’s reaction to “simple math”. BBAI shares displayed round-numbered support at the $7 price level for two days last week.
BBAI’s second round of technical support is likely to kick in at $5.
This price represents three technical features…
The combination of these three technical features should provide shares of Bigbear.ai with significant support as technical traders will likely attempt to buy the large dip.
Failure of the stock to hold the $5 price will target a lower price of $4 in relatively short order.
From a longer-term perspective, BBAI shares continue to benefit from their long-term trend.
BBAI stock is trading well above its 20-month moving average. That trendline serves as the line of demarcation between a technical bull and bear market trend for a stock. The 20-month moving average is currently trading at $2.25.
