Why DraftKings Shares Could Be Gearing Up For A Reversal

DraftKings Inc. DKNG shares are trading higher Wednesday as they were able to bounce off an area of support.

The stock is finally seeing some bullish movement after being in a freefall for the past couple of months. This week, Roth Capital upgraded the stock to Neutral and lowered the price target to $19, while Citigroup maintained a Buy rating and lowered the price target to $35.

DraftKings was up 8% at $19.94 at publication time.

See Also: Caesars Raises The White Flag: Why Jim Cramer Prefers DraftKings Stock

DraftKings Daily Chart Analysis

• The stock is bouncing off support in a sideways channel. The stock looked like it was going to see a bounce near the $19 level a few weeks ago, but was short-lived after falling lower again after the bounce. Bouncing off the level a second time could mean the stock is gearing up for a reversal.
• Resistance may be found near the $45 level as this was once an area of support that has been broken.
• The stock trades below both the 50-day moving average (green) and the 200-day moving average (blue). This indicates bearish sentiment, and each of these moving averages may hold as an area of resistance in the future.
• The Relative Strength Index (RSI) has been bouncing back and has moved up to 45 on the indicator. This shows that more buyers have been pushing into the stock and there is now almost as much buying pressure as there is selling pressure. The reversal of price is more likely to happen if the RSI can get above the middle line and push toward the overbought range.

What’s Next For DraftKings?

The stock looks to be bouncing and could begin to move bullishly once again as long as it can hold above the $19 level. Bulls want to see higher lows form and the RSI continue to climb. Bulls are then hoping for a cross above the moving averages.

Bearish traders want to see the stock unable to form higher lows and go on to fall below the $19 level. If this level can become an area of resistance, the stock may be ready for a strong bearish push.