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Buy the Earnings Dip in DraftKings? Check Out This Chart

DraftKings has tried to rally on the day but it's getting sold lower despite reporting earnings. Let's look at where support sits on the chart.

DraftKings  (DKNG) - Get DraftKings Inc. Report shares tried to rally early on Friday but currently are down about 5% after reporting earnings before the stock market opened.

While DraftKings was one of the growth stocks that has held up well amid the group’s recent slump, it’s starting to come under pressure now.

After the company reported earnings in late February with better-than-expected guidance, bulls wanted to own this stock aggressively, particularly with key events like March Madness coming up.

However, the stock isn’t finding buyers after its most recent report despite strong revenue and guidance

That’s also despite its 7.6% decline on Thursday when Penn National Gaming  (PENN) - Get Penn National Gaming Inc. Report reported earnings.

For its part, Penn fell about 8% on Thursday, although it’s up about 3% on Friday even with DraftKings’ dip.

From here, it’s got investors wondering what they should do with DraftKings: Buy or sell?

Trading DraftKings

Daily chart of DraftKings stock.

Daily chart of DraftKings stock.

With Friday’s open, the stock climbed above the 61.8% retracement after hitting multi-month lows on Thursday. It didn’t take long to lose this level though - as well as Thursday’s low.

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Shares also broke below the 200-day moving average in the process, although it may find its footing soon near the 50-week moving average. Or at least, that’s what bulls are hoping.

If that's not the case, it’s possible that DraftKings stock could be heading down toward $45.

That was the high from June 2020, a level that wasn’t hit again until DraftKings exploded through it in June. While $45 didn’t act as support during the October selloff, it did during the stock’s quick yet painful dip in January.

Should it lose the 50-week, this $45 area will certainly be in focus.

What happens if DraftKings also loses $45? After all, growth stocks are in a bear market right now. Well then, we could certainly be looking at more downside from here.

It could potentially put $41.25 in play. Below $40 and investors will start to question whether this stock drops down to the October low and the 21-month moving average down near $35.

While it would mark a painful decline from the high, it’s not impossible. 

For now though, bulls are looking at a reasonable setup against the 50-week moving average.

Look for a move back above the 200-day moving average. That will put $53 back on the table. Above that and $56.75 is possible.