PreMarket Prep Stock Of The Day: Penn National Gaming

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Not only is there a quadruple witch expiration happening this Friday, but there is also going to be a rebalancing of the S&P 500. One of the hottest issues being added to the index is Penn National Gaming PENN, making it the PreMarket Prep Stock Of The Day.

Huge Winner Off 2020 Low: After ending 2019 at $29.53, it was close to that level even after the broad market began to crumble in late February. It finally succumbed to market forces and swooned to $3.75 on March 18; This was three days ahead of the S&P 500 index, which bottomed on March 23.

Penn National ended 2020 at $86.37 and kept on going higher in 2021 as more and more states legalized online gambling and sports betting. Ahead of Friday's news that it's being added to the index, Penn posted a new all-time high ($132.97) and ended the session just under its former all-time closing high from Thursday ($130.97) at $130.47.

From the March low to Friday’s close, the issue had gained nearly 380%.

Price Action Off The Headline: On Friday around 4:30 p.m. EST, it was announced Penn is going to be added to the S&P 500 index Friday. As expected, the issue caught a strong bid as traders began to front-run the institutions that manage funds that mimic the index and will be forced to add Penn to their current holdings.

The initial surge took Penn all the way to $141.85 and it backed off to end the Friday’s after-hours session at $140.

There wasn't much volume off Monday's premarket open but the pace picked up after 7:15 a.m. EST. From that time until the open, the issue traded in a range from $137.70 to $140.96. By the open, it was just under the after-hours close at $138.78.

Don’t Expect A Tesla-like Move: Fresh in investor’s minds was the furious rally in Tesla after it was announced it was going to be added to the S&P 500 index. From the day of the announcement (Nov. 30), it closed at $567.60 and rallied to $584.76 the following day. On the actual day it was added to the index, it closed at $695. Keep in mind those gains came on top of the monster gains ahead of its 5-for-1 stock split.

During the time from when the split was announced (Aug. 11) and the record date (Aug. 21), Tesla rallied from $274.88 to $410. On the split date, it ended the session at $442.68.

PreMarket Prep Take: When Penn was being discussed on the show, it was trading at the $140 area.

"Tesla being added was a very unique situation, but it was being added as such a large component of the overall index," Dick said. "If you look at the list of stocks that have been added over the last five years, most of them end up going down from the level it was added at... be careful chasing Penn up $9."

Price Action During Regular Session: After a much higher open, Penn continued in that direction and just exceeded the premarket high ($141.85) peaking at $142 and sharply reversed course. As of 12:30 p.m. EST, the retreat has found support just ahead of the top of Friday’s range ($132.76), bottoming at $132.85. So far the rebound off that low has taken the issue to the upper $134 handle.

The full discussion on the issue from Monday’s show can be found here: