Published on: December 29, 2023, 06:43h.
Last updated on: December 29, 2023, 06:43h.
DraftKings (NASDAQ: DKNG) has been a standout among gaming equities in 2023. However, there has been a 7.89% decline this month, and market participants are closely monitoring the stock’s support levels.
Despite the decline, strong 2024 forecasts and constructive commentary during its annual investor day resulted in significant gains in November. For the year, DraftKings saw a 209.48% gain, making it one of the best performers in the gaming equities space. This upward momentum led to profit-taking, with some market participants reducing or exiting their positions in the stock.
“DraftKings had a stellar 2023, topped off with a two-year high back in November. The shares are now pulling back to potential support at the $34 region, which is a 38.2% Fibonacci retracement of its all-time highs and 2022 lows,” according to Schaeffer’s Investment Research. “Additionally, the security has tripled its 2022 close, coinciding with the site of its early August post-earnings high and rising 50-day moving average.”
Fibonacci retracements are part of technical analysis with traders using the horizontal lines to gauge a security’s potential areas of support and resistance.
Identifying DraftKings Stock Support, Resistance Areas
According to Schaeffer’s, key support for DraftKings stock can be found at $34, just below the 50-day moving average. The stock is currently trading at $35.25 and has not closed below $34 since early November.
In terms of resistance, $40 is likely the next price point to watch for traders. Round numbers are often psychologically important to some market participants, and strategic analysts may adjust price forecasts on the name because the consensus price target currently stands at $40.31.
Of the 31 analysts covering DraftKings, nine rate it a “hold,” suggesting potential for upgrades that could drive the stock higher.
The recent pullback in the stock could present a buying opportunity, as it has found technical support at an important price range, indicating a healthy correction and not a freefall.
Conversely, should DraftKings break below $34, it could potentially accelerate a sell-off.
Short Covering Could Help DraftKings Stock
Short interest in DraftKings remains elevated, despite some traders abandoning bearish bets against the stock. If the shares rally in 2024, shorts could be compelled to cover, potentially fueling more upside.
“It’s also worth noting shorts are in covering mode, despite a buildup in short interest from October to early November. There is still plenty of pessimism left to unwind, however, since 5.6% of the security’s available float sold short,” concluded Schaeffer’s.