The American exercise equipment and media company based in New York City, Peloton Interactive Inc. (NASDAQ: PTON) seems to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of the downtrend channel. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
Daily Chart – PTON
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA. This is a possible bullish sign.
#3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#4 MACD above Signal Line: The daily chart shows that the MACD (light blue color) is currently above the MACD signal line (orange color). This typically indicates a bullish setup.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI), and ADX has moved up from below both (+DI) and (-DI).
#6 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a resistance-turned-support level. This level is marked as a pink dotted line. So, this seems like a strong support area for the stock.
Weekly Chart – PTON
#7 Fibonacci Support: Usually, after an up-move, stocks typically retrace to any of the key Fibonacci levels before surging back again. The stock had taken support at the 38.20% Fibonacci support level as seen in the weekly chart, before surging higher. The current levels seem like a good area for the stock to move higher.
#8 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, and is also moving higher from oversold levels, indicating possible bullishness.
#9 Bullish RSI: The RSI is currently nearing 50 and moving up, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of PTON if it trades the price of $114.00.
TP: Our target prices are $120 and $130 in the next 4-6 months.
SL: To limit risk, place stop-loss at $110.20. Note that the stop-loss is on a closing basis.
Our target potential upside is 5% to 14% in the next 4 to 6 months.
For a risk of $3.80, our target rewards are $6.00 and $16.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the downtrend channel breakout level with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
— Tara
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