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Could Nautilus be the next Peloton?

Here's a trade setup for Nautilus
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We will look back on 2020 as the year that a large part of the population started working from home, and also working out at home. One of the great success stories of this year has been Peloton (PTON), which provides home exercise bicycles and other fitness products. 

Another hot name in this sector is Nautilus Inc. (NLS). Nautilus provides treadmills, ellipticals, and a variety of home exercise bikes. This year, Nautilus shares have gained over 1200%, while Peloton is up by 308%. 

What price should traders pay for Nautilus? Let's go to the chart to find out. 

Nautilus chart via TradeStation

Nautilus chart via TradeStation

Nautilus is  locked into a bull channel, and is currently trading near the center of that channel. The stock has been overbought according to its RSI (relative strength index) indicator for most of this month. However, a recent pullback has lowered Nautilus' RSI reading to a neutral 56.31 (bottom right of chart). 

Note that the stock's recent pullback occurred on light volume (shaded yellow). This is a positive sign during what has been a volatile week for the indices. 

My game plan is to buy this stock in the lower part of the channel, near $22. I'll close the trade if Nautilus breaks below its 50-day moving average (red), currently located at $18. 

Nautilus Inc. is scheduled to report earnings on November 9th after the closing bell. Analysts are looking for earnings of .34 cents per share on revenue of $108.4 million

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Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here