Trading Strategies For DraftKings Stock Before And After Q4 Earnings

DraftKings, Inc DKNG was trading about 2.6% higher Thursday as the company heads into its fourth-quarter earnings print after the close.

When DraftKings printed a third-quarter earnings beat Nov. 4, the stock closed about 2% higher the following day before surging more than 33% over the subsequent six trading days.

For the third quarter, DraftKings reported a loss of $1 per share on revenues of $502 million, beating a consensus estimate for a loss of $1.04 on revenues of $437.2 million.

For the fourth quarter, analysts, on average, estimate DraftKings will report a loss of 59 cents per share on revenues of $800.27 million.

On Wednesday, Susquehanna analyst Joseph Stauff maintained a Positive rating on DraftKings and raised the price target from $19 to $24. Stifel analyst Jeffrey Stantial maintained a Hold rating on on the stock and raised the price target from $15 to $17.

From a technical analysis perspective, DraftKings’s stock looks bullish heading into the event, having regained the 200-day simple moving average (SMA) and trading in an uptrend. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

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The DraftKings Chart: DraftKings reversed into an uptrend on Dec. 28, which eventually allowed the stock to regain support at the 200-day simple moving average (SMA), indicating a new bull cycle is on the horizon. DraftKing’s most recent higher low was formed on Feb. 10 at $15.56 and the most recent confirmed higher high was printed at the $17.99 two days prior.

If DraftKings continues to trade above the 200-day SMA, the 50-day SMA will eventually cross above the 200-day, which will cause a golden cross to form and give bullish traders more confidence going forward. If the stock suffers a bearish reaction to its earnings print, DraftKings is likely to bounce up from the 200-day SMA.

If the stocks receives a positive reaction to the print and pumps higher, a retracement over the next few days is likely because DraftKings’ relative strength index (RSI) is measuring in at about 70%. When a stock’s RSI reaches or exceeds that level it becomes overbought, which can be a sell signal for technical traders.

If DraftKings trades lower on Friday, the hanging man candlestick that was printing on the chart on Thursday will be confirmed.

DraftKings has resistance above at $19.16 and $21.45 and support below at $17.21 and $14.97.

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