Peloton (PTON) Preparing for a Major Selloff?

Peloton Interactive, Inc. (PTON) operates at-home fitness platform for live and on-demand indoor cycling classes. The company pioneered connected, technology-enabled fitness, and the streaming of immersive, instructor-led boutique classes for its Members. It operates through three reportable segments: Connected Fitness Products, Subscription and Other…

Take a look at the 1-year chart of Peloton (NASDAQ: PTON) below with the added notations:

Over the past seven months, PTON has created a major level of support around the $95 (green) area. That line is also the “neckline” for the stock’s head and shoulders (H&S) reversal pattern. Above the neckline you can see the H&S pattern (red) has been completed. 

Confirmation of the H&S would occur if PTON were to break the support, and lower prices would be expected from there.

PTON has formed a head & shoulders pattern. A long trade could be made at $95 with a stop placed below that level, but the bearish pattern implies a short trade to be entered on a break below that level instead.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT