How DraftKings Could Make New Highs After Strong Earnings

DraftKings is rising after reporting pretty strong earnings with upbeat guidance. Let's look at how it could make new highs.
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Growth stocks have had trouble rallying on earnings this quarter, even when the numbers are good. DraftKings  (DKNG) - Get Report may be bucking the trend on Friday, up about 5% on the day.

While up 5% isn’t bad, the stock was up 8% in early trading before giving up almost all of its gains. It's been a mixed session for the markets, which isn't helping.

Shares were reacting to the better-than-expected quarterly report DraftKings released Friday morning.

Revenue crushed expectations, while the company’s guidance came in well ahead of Wall Street’s expectations. Now guiding for $900 million to $1 billion in sales in fiscal 2021, DraftKings clearly has more momentum than analysts thought.

The announcement comes a day after the company added Cal Ripken Jr. as a special adviser.

The news is likely lending a hand to Penn National Gaming  (PENN) - Get Report, which is higher on the day by about 6% as the indices continue to gyrate. 

Let's look at the chart to see if DraftKings can make new highs. 

Trading DraftKings

Daily chart of DraftKings stock.

Daily chart of DraftKings stock.

DraftKings stock pushed to new all-time highs earlier this month, briefly topping the $64.08 mark it hit in October before descending on a nasty 45% peak-to-trough decline by the end of the month.

Despite tagging new highs in February, DraftKings has struggled to maintain momentum. On the plus side, it has held up pretty well over the $56 mark, which was resistance in January and nearly marked last month’s high.

To hold above that area is bullish.

The exception to that observation is Tuesday Feb. 23, when DraftKings broke $56 and plunged through the 50-day moving average. Shares hit the 61.8% retracement of the previously mentioned October range and bounced hard, closing above all of the levels I just mentioned.

Obviously bulls have been willing to soak up the dips, but where does that leave us now?

We have seen a number of great earnings reports this quarter, but many failures to push higher on those results. If DraftKings does the same, investors will want to see it hold $56 and the 50-day moving average.

Below this week’s low may put $50 and the 100-day moving average on the table. If it fails, the key $45 level could be in focus.

At current levels, there’s some indecision as shares sit on the 21-day moving average. Should bulls take control, look for DraftKings stock to clear $64.80 and make new highs.

If it can, the 161.8% extension of the February range (drawn in blue) is in play near $72.25, followed by the long-term 161.8% range extension around $82.