How Far Can DraftKings Rally After a Fresh Breakout? - TheStreet

How Far Can DraftKings Rally After a Fresh Breakout?

DraftKings stock hit a high on Tuesday, then turned lower. Let's look at the charts to see how far the stock can go.
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DraftKings  (DKNG) - Get Report stock continues to move well. While the shares are down about 1% on Tuesday, the stock had earlier hit an all-time high in the session at $59.45.

Even with Tuesday’s dip — which comes as some NFL teams suspend activity due to the coronavirus — DraftKings stock is still up more than 5.5% for the week.

What’s going on in the broader market doesn't seem to matter. While the indexes have been swaying, DraftKings and Penn National (PENN) - Get Report investors don’t seem to care.

Admittedly, these names don’t necessarily trade without volatility. But the pullbacks have been shallow as buyers continue to gobble up the dips.

Let’s take a closer look at DraftKings now that the stock has pushed up to new highs.

Trading DraftKings Stock

Daily chart of DraftKings stock.

Daily chart of DraftKings stock.

Earlier this month, the stock pushed up to the 161.8% extension, where it promptly met resistance. While DraftKings stock held up for a few days, sellers were eventually able to push it lower.

But that dip didn’t last long, with the 10-day moving average ultimately holding as support. With a multiday rally unfolding, DraftKings stock on Monday was able to close above the 161.8% extension.

The bulls would love to see this extension hold as support. If that remains the case, they will be looking for a rotation through Tuesday’s high and north of $60. On the upside, see how the shares handle the two-times range extension up at $62.04.

Ultimately, the bulls will likely be looking for a push up to the 261.8% extension, near $72.70.

On the downside, look to see how DraftKings stock handles another dip to the 10-day moving average. Below could open the door to an eventual retest of the June highs near $45. For aggressive bulls, that may be a buying opportunity.

For more conservative dip-buying bulls, they may prefer to wait for a test of the 50-day moving average and/or the $40 breakout level. This level was resistance in late August and early September before acting as support once DraftKings stock pushed through it.

No matter how you slice it, DraftKings has been a relative strength leader. That won’t last forever, but until it changes, it will be easier to bet with the trend than against it. That means trading breakouts and buying dips.