Does the Peloton Rally Have Legs?

Ed Ponsi

From a reader:

"Ed, now that Peloton has hit $70, is it time to sell?"

That question references my article from June 22nd, Peloton Keeps On Rolling. 

At the time the article was written, Peloton Interactive (PTON) traded at $54.82, and had just broken out from an ascending triangle. The article contains the line, "This bullish pattern projects the stock to the $70 level."

On Tuesday, the stock closed a few cents shy of $70, but Peloton already achieved that target on August 3rd. The run from $54.82 to the August 3rd close of $72.68 represents a gain of over 30% in just six weeks. 

Is it time to ring the register on the Peloton trade? Let's check the chart to find out. 

PTON
Peloton (PTON). Chart by TradeStation

Peloton is riding along in a bullish channel (black parallel lines). The triangle from the earlier article is still visible within that channel, highlighted in red (point A). 

Peloton recently experienced a sharp pullback (point B), which pushed the stock to the low end of the channel. That's an ideal location to initiate a fresh trade, or add to an existing long position. 

After a 7% climb on Monday (point C), Peloton is now trading near the center of the channel. As long as the price remains within that channel, I see no compelling reason to sell. 

If Peloton approaches the upper end of the channel, a partial exit may be appropriate. If the stock falls out of the channel altogether, that would most likely signal the end of the trade. 

Peloton proudly declares that it produces "The best cardio machine on the planet." I'm not sure how one would verify that claim, but the fitness company certainly has investors' pulses racing. 

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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.