$PTON : Technical Analysis vs. Fundamentals

PTON : Technical Analysis vs. Fundamentals

Take a look at this chart. Imagine you know nothing about Peloton's recent earnings report. Based solely on the chart, would you buy it now?

If you're a technical analyst like me, you might instinctively shout "hell yes!" But now consider the same question after reading through the latest earnings report. Suddenly, a confident "yes" isn't so easy to utter, right?

Why? This is because our trading decisions can be influenced by factors beyond what's purely visible on the chart. A bullish pattern suddenly loses its appeal in light of negative earnings news.

I've observed this in myself. A casual comment from CNBC talking heads can sway my technical analysis. On the other hand, I've heard of Takashi Kotegawa, a Japanese trader who disregards fundamentals entirely, focusing solely on technical analysis.

Some might call that insane. But is it?

What is technical analysis, exactly? For me, it's about understanding the collective mindset of market participants. The chart reflects their decisions, their fears, and their hopes. By analyzing it, we can try to anticipate their next move, ultimately guessing the future price action.

Enough philosophy, let's get back to $PTON. The chart suggests a potential reversal. We see a base forming at the end of the downtrend channel, accompanied by a cup-and-handle pattern.

(Yes, textbooks typically label cup-and-handles as continuation patterns. But be surprised how often they've served as reversal patterns during bottoms this year alone.)

Furthermore, MACD, RSI, and A/D indicators all trend upwards, hinting at further price gains. The neckline around $6-$7 provides a clear resistance.

Therefore, if the price breaks above $7, we can expect further upside potential.

Upside targets:
$7
$8.65 - $9
$10
$12

Downside risk:
$5