PreMarket Prep Stock Of The Day: DraftKings And The Super Bowl Hangover

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.

The Scenario: With legalized gambling approved in several states, issues like DraftKings Inc. DKNG and Penn National Gaming PENN have been soaring. Add in the pent-up demand for sports betting as a result of the pandemic and it's not surprising these companies have prospered.

Since bottoming in March ($10.60) ahead of it becoming a SPAC, DKNG improved on its former all-time high from October ($64.19), when it peaked in Monday’s session at $64.78. Its all-time closing high was made on Friday at $63.67.

Pre-Super Bowl Rally: With the Super Bowl being one of the highest wagering sporting events of the year, investors anticipated that gaming-related issues were going to get a lot of attention in the week ahead of the game.

After ending its Jan. 29 session at $54.11, the issue was higher every day last week with the bulk of the gains coming on Tuesday ($54.64 to $59.32) and Thursday ($60.11 to $63.16).

Game Over: Although no definite statistics have been announced on the money wagered, with the amount of straight out to win wagers with the spread, moneyline squares and multitude of prop bets, it's going to be a staggering sum.

When the issues were being discussed on Monday’s show, Dennis Dick anticipated there may be some profit-taking off last week's price action.

"Both of the gaming companies had big rallies last week and I would be careful about chasing them up here," he said. "They are both great companies, but I am looking to buy them on a pullback.”

Price Action: After a higher open, DraftKings only rallied another 6 cents to a new high all-time high ($64.78) and sharply reversed course. As of 1:15 p.m., the ensuing decline easily breached Friday’s low $62.41, but found support just under Thursday’s low ($60.84), reaching $60.84. At this time, it's attempting to remain in the $62 handle.

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