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Peloton's Bounce May Not Travel Very Far

Without a bottom formation, prices are more likely to sink still lower in the months ahead.
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Peloton Interactive (PTON) managed to close higher on Friday when the broad market averages sank hard. Let's check out the charts of this exercise equipment and media company as analysts and market forecasters are trying to figure out the impact of the new Omicron variant and what it means for individual stocks like Peloton.

In this daily bar chart of PTON, below, we can see that prices have been trimmed down from a high in January. A low was made in May but a downside price gap earlier this month smashed the May low and refreshed the downtrend. Prices are trading below the declining 50-day moving average line and the declining 200-day moving average line.

The On-Balance-Volume (OBV) line shows weakness from early June as traders were more aggressive sellers. The trend following Moving Average Convergence Divergence (MACD) oscillator has spent much of the past year below the zero line in bearish territory. The oscillator has narrowed recently and could generate a cover shorts buy signal.

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In this weekly Japanese candlestick chart of PTON, below, we see a weak picture. Notice the large number of large red candles? This tells you that there has been some aggressive selling over the past several months. Prices are trading below the declining 40-week moving average line. The weekly OBV line is pointed down and the MACD oscillator is bearish.

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In this daily Point and Figure chart of PTON, below, we can see a potential downside price target in the $38 area.

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In this weekly Point and Figure chart of PTON, below, we used a five box reversal filter. Here the software shows a possible price target in the $23 area.

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Bottom line strategy: In our November 5 review of PTON, we recommended that "Don't fight the downtrend. Do not try to pick a bottom. Continue to avoid the long side but also continue to exercise." PTON might bounce to the upside a little but without a bottom formation, prices are more likely to sink still lower in the months ahead. Continue to avoid the long side.

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