DraftKings Stock Hits Key Support Area
DraftKings (NASDAQ: DKNG ) is one of the brightest gaming stocks in 2023. But this month's 7.89% loss has the stock hitting some key support levels.
After issuing strong 2024 guidance and making constructive comments at its annual investor day, DraftKings surged in November, helping the stock rise 209.48% in 2023 - easily the highest return of any gaming industry one of the companies. . This eye-catching rise has also given some market participants a reason to lock in profits and reduce or clear their positions in the near future.
DraftKings had a great year in 2023, hitting a two-year high in November. Shares are currently falling back toward potential support in the $34 area, which represents the 38.2% Fibonacci retracement of the all-time high and 2022 low. ” According to Schaeffers Investment Research. “Additionally, the security’s 2022 close has tripled, coinciding with the early August post-earnings high and a rise in the 50-day moving average. "
Fibonacci retracements are a part of technical analysis where traders use horizontal lines to estimate potential areas of support and resistance for a security.
DraftKings Stock Support, Resistance
As Schaeffer noted, key support for DraftKings stock could be $34, just below the 50-day moving average. The stock is trading at $35.25 today, having not closed below $34 since early November.
As for resistance, $40 may be the next price point that traders should watch. Round numbers often carry important psychological significance for some market participants, and $40 is just above DraftKings' 52-week high of $39.35. If the stock rises to $40, analysts may be forced to increase their price forecasts for the company, as the current consensus price target is $40.31.
Against this backdrop, it's worth noting that 9 out of 31 analysts covering DraftKings rate the company a Hold, suggesting there's room for an upgrade that could push the company higher share price.
Some market watchers believe the recent declines in strong gaming stocks are healthy and may represent a buying opportunity. DraftKings stock's recent losses were contained as the stock found technical support in a key price range, suggesting it's not in free fall.
The other side of this equation is that the sell-off could accelerate if DraftKings falls below the $34 mark.
Short covering could help DraftKings stock
While some prominent traders have abandoned bearish bets on DraftKings, short interest in the stock remains high. This could suggest that as stocks rally in early 2024, short sellers may be forced to unwind their positions, which could lead to more upside.
“It is also worth noting that despite the surge in short interest from October into early November, short positions were in covering mode.” However, there is still a lot of pessimism to iron out, as available short positions account for 5.6%. The free float of the security was shorted," Schaeffer concluded.
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Source: www.casino.org
