Time to Act as Peloton Approaches Technical Breakout
Peloton’s narrowing wedge signals a strengthening setup. Here's my current plan for the stock.
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The time draws near. I think.
Our old "Stocks Under $10" friend Peloton Interactive (PTON) has given up roughly $0.30 per share since the last time I bothered you with a column on the name about two and half weeks ago. I bother you once again because though the stock has moved in the wrong direction, my plan may be working.
Readers might remember this chart that I showed you at that time:
I showed readers the falling wedge pattern of bullish reversal that had followed a rising wedge of bearish reversal in perfect fashion. The stock had tried and failed to retake its 21-day exponential moving average (EMA) and on multiple attempts, while also trying to break out of the wedge. Earnings are still more than a month away, so that's not really an issue yet.
Now, See This
The stock is making another attempt at a breakout, now that the wedge under discussion has substantially narrowed, leaving a greatly decreased opportunity for any more back-and-forth activity between the two trendlines. This is the first attempt at a breakout since December 12.
Readers will also note that PTON suffered a "death cross" of the 50-day simple moving average (SMA) below the 200-day SMA. What many folks and even technicians miss is that the bearish signal of such a cross-under is greatly diminished when the 200-day SMA is rising as it was here.
We have other positive readings below the chart in the daily moving average convergence divergence (MACD). The histogram of the 9-day exponential moving average (EMA) is back in positive territory for the first time since December 15. That's short-term bullish. Additionally, though both lines are still in negative territory, the 12-day EMA has crossed above the 26-day EMA. I'd rather have both lines above the zero-bound, but the cross-over is a start.
There are a lot of key moving averages to the stock's immediate north. Yes, that can impose resistance on the shares. That can also act as a huge catalyst if taken and held in one fell swoop.
My Current Peloton Plan
Price Target: $9.00 (reiteration)
Pivot: 200-day SMA (currently $7.00)
Add: Probably Today.
Panic: Loss of the May low ($5.82)
At the time of publication, Guilfoyle was long PTON equity.
