Duolingo has overshot any reasonable valuation.

2021년 9월 24일

Although Duolingo only has a short price history, it appears that a dramatic pullback is ahead. The stock is in a rising wedge pattern (4 hr chart) most likely resulting in a 21.43% correction downward. The volume has been drying up drastically this week signaling the stock is too weak to break the $205 barrier. Analyst estimates hover around the $145 mark and most message board activity I have read supports the idea that retail investors also believe the stock is overvalued.

Importantly, Duolingo is a speculative, long-term tech play that depends on cheap access to capital to reach their financial goals (similar to TSLA), because interest rates are increasing so much in the last few days (10-year treasury up 12% in last 2 days alone), it seems probable that investors will rebalance their portfolios away from risky stocks like this one and take profits while the price is still at all-time-highs.

The RSI indicator is in a triangle formation while simultaneously showing bearish divergence; this pattern only has a few more days maximum before a break must occur and with the volume oscillator indicator showing volume deep in the net-outflow range, we can expect the price to break downward.

My strategy is to purchase Oct 15th $165 Puts and plan on selling these when we get closer to the $155 range. I would caution anyone else planning on doing the same though, Duolingo's volume is very low and the options chain has very little open interest, the liquidity of the market is not ideal.