New Peloton Price Target as I Adjust My Strategy

Regular readers know that I cut my long position in Peloton PTON in half roughly two weeks ago in response to the stock having broken down from a rising wedge pattern bearish reversal and at the same time, failing to hold its 50-day simple moving average (SMA). That was my panic point at the time, and living by a set of rules that have allowed me to remain relevant across multiple eras on Wall Street, I took the path of risk management. 

That paring down of exposure made me look smart for a few days. Now, not so much. Let me show you what I saw then...

The sale made sense. The fact that the shares are up off of those lows​ does not bother me. We're still up 15% on what's left of the position. I know I reduced risk when I was supposed to. That said, is opportunity knocking yet again? Does this stock, like a mythological cat, have nine lives, managing to just keep on keepin' on despite the obvious hardships of its business.?

Let's remove the rising wedge (which was real but now muddles the current picture) and replace it with a Raff Regression model:

Hmm... Now that's a horse of a different color. Literally. No, that selloff in mid-June looks like it found support where maybe it should have. 

PTON is currently wrestling with potentially retaking its 50-day SMA while its 200-day SMA lines up with the central trendline of the model. Again, hmm... That makes the 200-day SMA, now at $7.20, the true upside pivot. 

The company will report in late August, so we have time for a story to play out in front of us.

New Plan for Peloton

Add here? No.

Add on a take and hold of the 50-day SMA? Maybe, but small.

Add on momentum if the new pivot can be taken and held? Definitely.

Price Target: $8.50 (down from $9.50)

Pivot: $7.20 (200-day SMA)

Panic: Loss of lower trendline of the Regression model.

At the time of publication, Guilfoyle was long PTON equity.