How Far Can Penn National Go? Let's Look at the Charts

Penn National Gaming has been on fire and hit new highs on Friday. Let's look at how the charts are setting up (and where to buy the dip).
Publish date:

Penn National Gaming  (PENN) - Get Report is one of the most enthralling stocks of 2020.

Shares were beaten down to sub-$4 in March as investors worried about the company’s liquidity.

On Friday, Penn stock hit a high $76.62, up more than 20-fold from its 52-week low of $3.75.

Is that the end of the run? While shares are bound to correct eventually and even as they are hitting a key retracement mark, analysts aren’t necessarily giving up on the name.

On Sept. 15, Penn stock received a buy rating and $75 price target from Craig-Hallum. Rosenblatt Securities recently assigned an $80 price target, while Stifel Nicolaus just slapped an $85 price target on the name, the highest on Wall Street.

If Penn were to climb to $85, it would represent another $12 of upside or 16.5%. The question is whether it can get there. Let’s look at the charts.

Trading Penn Stock

Daily chart of Penn stock.

Daily chart of Penn stock.

Because of the year-to-date range, the chart is not the most visually appealing. However, it is necessary to see the monstrous rally from the March lows and the breakout to new all-time highs in August.

While the move to the upside has been powerful, I wouldn’t say it’s been parabolic. After breaking out over $40, Penn consolidated reasonably between $50 and $55 for about a month.

As the 20-day moving average held as support, shares eventually broke out over the 161.8% extension near $60, climbing to the two-times range extension near $74 a few days later.

If long, I would consider taking at least some profits into this area. While a close over the two-times range extension could trigger a squeeze up to $90, we don’t want to be careless, either.

Should Penn stock get to $90, it could put the 261.8% extension in play up at $96.51, followed by $100. Statistically speaking, a close over $90 gives investors favorable odds of reaching $100 (although it is a probability, not a guarantee).

As for bulls looking to buy, I’d be on the lookout for a dip to the 20-day moving average and a retest of the 161.8% extension.

The ultimate pullback — while painful — would be a decline back toward $40. There it finds the major breakout from the February highs that would likely be a solid buying opportunity for bulls. Although, on a pullback of that size, we would surely need to re-examine Penn stock.

For now, watch for a close over $74.61 (the two-times range) or for a dip to the 20-day.