Going Big in Peloton as Pros Defend Stock at 'Crucial Spot'
Here's why I'm buying, my new price target and my updated trading strategy.
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Readers may recall that I wrote to you on October 1 and warned that Peloton Interactive (PTON) had developed a second Rising Wedge pattern, which is a pattern of bearish reversal. I pointed out what happened once the first Wedge came to its completion and planned to add down to the stock's 50-day simple moving average (SMA).
Well, the stock ripped right through its 21-day exponential moving average (EMA) and 50-day SMA on one fell swoop. I had planned to trigger my panic point upon the loss of the 200-day line. The stock may still lose that line, but then again, it may not.
Take a look:
The fact that the stock has been experiencing a now three-day long battle at its 200-day SMA implies that institutional investors may be defending the stock there. I am not crazy. I will still trigger the panic should this line be lost. I see the weak relative strength index (RSI) and the bearish-looking daily moving average convergence/divergence (MACD). I also see what looks like professional money in action.
Readers may need to be reminded that a stock does not lose a level when said level is simply pierced. A level is lost when contact with that level is broken. Hence, the 20-day line is still very much in play.
Given the probability that professionals are defending the stock as we saw late August into early September, I am adding to my long position and am willing to go rather large as long as I remain alert and use my tools of risk management.
In this case, though I do not always use my 8% rule for "Stocks Under $10" stocks, given that it is not a volatile stock, I will likely implement that rule if needed.
Price Target: $10 (down from $11)
Pivot: $7.90 (50-day SMA)
Add: Right here, right now
Panic: 8% loss
At the time of publication, Guilfoyle was long PTON equity.
