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.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

Dave Portnoy of Barstool Sports has led the recent charge of retail traders. His always entertaining and informative content has introduced the markets to a new and younger demographic, something that's been lacking for years.

Since most parents have been burned by the burst of the dot-com bubble in 2000, the financial crisis in 2008 and more recently the coronavirus pandemic, many of them have been on the sidelines during the roaring bull market — and less than eager to introduce their kin to the world of investing. 

On Friday's PreMarket Prep show, Benzinga founder Jason Raznick discussed his long position in Penn National Gaming, Inc PENN, which is Davey Day Trader’s largest holding and the PreMarket Prep Stock of the Day. 

The author of this story broke down the recent price action in the issue and its implications on the show. 

Penn National Adding To 2019 Gains: After ending 2018 at $18.83, Penn National participated in the rally in the broad market, ending 2019 just off its high for the year ($26.26) at $25.56, for a tidy 36% gain.

With legalized sports gambling set to commence in the U.S. in 2020, investors identified the issue as a pure play to capitalize on the new dynamic.

As a result, it appreciated another 17% in January ($25.56 to $29.82) and really caught a bid in early February, blasting to a new all-time-high Feb. 28 at $39.14 and an all-time-closing high that same day at $38.17.

Down Goes The Market, Penn Follows Suit: As the market began to retreat in late February, so did shares of Penn. The issue ended the month just below its January closing price ($29.83) at $29.57, nearly $10 off its all-time high.

During the indiscriminate selling in March, the issue cratered all the way to $3.75. Although the company’s original IPO was in 1994, it reorganized and undertook another IPO in November 2013 at $13.65.

Penn National did not find a tradable bottom until August 2014 at $10.07.

Not only did the issue make a new all-time-low, but it did so by a wide margin.

What A Rebound For Penn National: As the markets began to rebound in April, May and June, the issue more than participated.

Compared to the S&P 500 index's rebound of 50% off the low, Penn’s was nearly 1,000%

Penn went to make a new all-time-high ($40.14), but failed to improve on its all-time-closing high from February.

Raz’s Dilemma: Raznick is long calls in Penn Gaming and is anticipating that the potential announcement of a gambling gaming app will be a catalyst to take the shares even higher in the future.

Since it impossible to know if or when the announcement will be made — and whether the news already been baked into the stock — the author of this article provided a key technical level to follow over the next few days,

50% Retracement Of Penn National's Recent Decline: Although the author of this article is not a fan of Fibonacci Retracements (.381 and .682), he is a big fan of 50% retracements.

In the case of Penn Gaming, it has retreated from its all-time high of $40.14 to $27.52 and has staged a rebound.

The simple math is to take half of the decline — $12.62 — and dividing by two, which equals $6.31. When added to the recent low, 50% of the rebound is $33.83.

On the show, that number was rounded to $34 and identified as a key level for the issue to hold in order to rechallenge and make a new all-time-high.

Penn Price Action: Although Penn did rebound on Tuesday to $34.66, it faltered and ended the day at $31.55. After a slight gain on Wednesday, it was weak again on Thursday.

While the stock and the importance of the $34 level were being discussed on the show, it just happened to be trading there. 

After a $2 higher open, it went only another 26 cents to $33.87 and reversed course.

At last check, the stock was up 1.39% at $32.17. 

The full discussion on the issue can be found here:

Photo by Santcomm via Wikimedia.