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Trading Dave & Buster’s Earnings: Key Support and Resistance Are Clear

Despite a strong quarterly report, Dave & Buster's is trapped between support and resistance. Let's look at how the charts are setting up.

Dave & Buster’s  (PLAY) - Get Report started off higher on Friday but it’s not all fun and games in midday trading.

Shares were up as much as 8.8% in early trading. The good news is that shares are not really down on the day - off just 50 basis points.

Of course, the bad news is that the stock has given up all of its post-earnings gains.

That’s despite Dave & Buster’s beating revenue expectations and turning in a surprise profit to top earnings estimates.

It’s also as analysts now see a swift rebound in the company’s revenue for the year. With the economy surging back to life and the public flocking to public places, Dave & Buster’s stands to reap the rewards.

That’s after the stock was nearly wiped out last year.

When the coronavirus swept through the U.S., it shuttered many businesses. Shares of Dave & Buster’s fell a whopping 90% from the 2020 high to the March 2020 low. Since then, it’s recovered about 10-fold from the lows.

Where can it go from here? Let’s look at the chart of Dave & Buster’s stock.

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Trading Dave & Buster’s

Daily chart of Dave & Buster's stock.

Daily chart of Dave & Buster's stock.

Shares continue to trade in a well-defined pattern. By that, I mean $40 remains support and $49 to $50 has been resistance.

The 2020 pre-coronavirus high comes into play at $48.80. Clearly that level has also been resistance for the stock amid the current rebound.

More recently though, downtrend resistance (blue line) has been an overhang for the stock. Trending lower off its March high, this area rejected Dave & Buster’s stock both before and after earnings.

This measure rejected the stock on Tuesday and Wednesday, and then again on Friday. From here, bulls need to see this cluster of moving averages hold as support.

Specifically, I’m referring to the 10-day, 21-day, 50-day and 21-week moving averages. Should this area fail, it’s possible that Dave & Buster’s stock tests back down into range support near $40.

On the upside, bulls are looking for a close above downtrend resistance. While shares have temporarily traded above this measure through the week, at no point have we gotten a daily close above it.

If Dave & Buster’s stock can do that, it puts $49 in play. Above $49 and the 2021 high at $51.73 is on the table.

If and when the stock gets there, then we can start to talk about upside extension levels in a follow-up piece.