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Buy or Sell DraftKings Stock on Earnings? Here's the Trade

DraftKings stock is rallying on Friday but struggling for momentum against key resistance. Here's the setup to know now.

DraftKings  (DKNG) - Get DraftKings Inc Class A Report shares have struggled to maintain momentum on Friday but were rising about 2% on the day after reporting earnings.

Shares initially opened higher by 4.5% and climbed as high as 6.5% in early trading. However, the stock has faded fading from those highs, as well as a few key technical levels.

That’s despite reporting a narrower-than-expected loss in the quarter and giving a boost to its guidance.

The report also comes on a day when the July jobs report was issued. While the employment numbers beat expectations, the market is struggling to push higher - particularly the Nasdaq.

When we look to Penn National Gaming  (PENN) - Get Penn National Gaming, Inc. Report, the stock made new 2021 lows on Thursday before reversing higher and climbing about 9% on the day.

It’s down slightly Friday and while many investors correlate Penn with DraftKings, they must remember the former has a physical casino operation too - like Wynn Resorts  (WYNN) - Get Wynn Resorts, Limited Report and others with digital and physical footprints - while most of DraftKings’ revenue is online.

That said, increasing COVID-19 cases does create a concern for sporting events, which could pose a threat to DraftKings.

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Trading DraftKings Stock

Daily chart of DraftKings stock.

Daily chart of DraftKings stock.

Like Penn, DraftKings hasn’t been trading well. However, it was not making new lows this week.

Instead, shares bottomed in early May as the bear market in growth stocks was coming to an end.

Earlier this week, DraftKings broke out over downtrend resistance (blue line) and reclaimed its 50-day moving average in Thursday’s session. While rallying today, the stock is running into some resistance.

That comes from the 21-week, 50-week and 200-day moving averages. It also comes from the July high at $53.39.

If DraftKings can clear Friday’s high at $53.79 (and thus, all the levels mentioned above), then it really opens up the potential on the upside. Specifically, $56 would be in play first, then potentially $60 or higher.

On the downside, losing the 50-day moving average would be really disappointing, putting the $47.50 area on the table. Below that and it’s possible that the stock tests down into the low-$40s and retests the May low.