Peloton (PTON) shares are erupting higher on Monday, up more than 18% on hopes of a potential buyout.
At the highs, shares were up about 30% on the day after the rumor was floated after the close on Friday.
More specifically, investors are hopeful that Apple (AAPL) may be a potential suitor in the deal.
Others that have been talked about include Amazon (AMZN) and Nike (NKE).
Amazon seems to have taken the lead in the discussion, although it’s not clear whether a buyout will ultimately come to fruition.
Of course, given the big discount in the share price, investors are hopeful for a potential deal on what became a favorite stock play amid the Covid-19 pandemic.
Despite the headlines though, the stock chart is still a disaster.
Trading Peloton Stock
Chart courtesy of TrendSpider.com
Because of Peloton stock’s massive decline over the last few months, I had to really zoom into the current downtrend.
That ultimately excludes the stock’s even more massive decline from the all-time high.
Before today’s action, the stock was down 85% from the highs. That is absolutely brutal price action, as Peloton stock was at its lowest level since March 2020.
On the plus side, shares are trying to close above the 21-day moving average for the first time in several months.
That came after Peloton stock hammered out a nice low around the $23.25 level. In fact, Peloton hammered out a low near this level over the course of three straight weeks.
That makes it pretty meaningful in my mind.
Should the stock come back down to this level, I will look at it as support, even though that will equate to a significant decline from current levels.
If this level fails and does not lead to a bullish reversal, it will be a very dire development for the stock.
On the upside, I am watching downtrend resistance (blue line). This level rejected Peloton stock on Monday as the stock fades from the session high.
On a move above Monday’s high, bulls will likely be sniffing for a test of the 50-day moving average, as well as the daily VWAP measure and January high near $37.70.
That said, this stock will be highly sensitive to M&A-related headlines.
