How to Trade Peloton as Shares Pedal to New Highs

Peloton shares are hitting all-time highs after the company announced a $420 million acquisition of Precor.
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Peloton  (PTON) - Get Report hasn’t wasted any time pedaling back to all-time highs.

The stock has gained more than 11% on Tuesday, putting a cherry on top of the recent rally. Shares have rallied for seven straight sessions now, climbing 36% during that span.

From the December low on Dec. 10, the stock has jumped 48.4%. The rally comes after an interesting stretch for Peloton. 

Shares struggled for traction for a bit. However, ahead of the holidays and with Covid-19 cases continuing to spike, it’s understandable why bulls couldn’t resist the stock.

Helping give it a boost on Tuesday was the company’s $420 million acquisition of Precor.

As TheStreet noted earlier, “the deal gives Peloton an increased presence in commercial spaces such as fitness centers, hotel gyms and universities, as well as an expanded manufacturing base.”

Now at new highs, what do the charts say?

Trading Peloton

Daily chart of Peloton stock.

Daily chart of Peloton stock.

Truth be told, Peloton stock needed to rest. Just look at the stellar climb the stock put up in August and September.

In that late-summer stretch, Peloton rallied for nine straight weeks and in 12 of 13 weeks from the July low. The move was really spectacular, but it needed to consolidate.

That consolidation came in the form of a correction, as shares dipped from a high of $139.75 down into the $90s.

Some will say the stock broke out on Nov. 30, while others will argue that the breakout took place on Dec. 14. In truth, both are right, depending on how one draws their trend lines.

The latter breakout couldn’t have happened without the former, although the latter was a bit more impressive. First, it cleared resistance and the 61.8% retracement. Second, it got to rallying right after the breakout rather than chopping sideways.

While the move is impressive, we do have a pretty mixed daily candle all the way up here near $160.

Should Peloton pull back, let’s see if $140 acts as support. That would be a pretty bullish development and give traders an opportunity to get back into the name. That may also time up nicely with a test of the 10-day moving average. Either measure may act as support, depending on which is tested first.

On the upside, look for a move above Tuesday’s high at $166.23. Above puts the 161.8% extension in play. That's potentially followed by the two-times range extension up near $187.50.