Published: December 28, 2023

DraftKings Stock dips after doubling over the last 12 months

DraftKings (NASDAQ: DKNG) was one of the brightest stories among gaming equities in 2023, but a 7.89% decline this month has the stock flirting with some important support levels.

After unveiling unveiling strong 2024 forecasts and on the back of constructive commentary at its annual investor day, DraftKings soared in November, helping the stock to a 2023 gain of 209.48% — easily good for one of the best showings among all gaming equities. That scintillating run also gave some market participants reason to lock in profits and recently trim or eliminate 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

As noted by Schaeffer’s, key support for DraftKings stock is likely found at $34, slightly below the 50-day moving average. The shares settled at $35.25 today and haven’t closed below $34 since early November.

In terms of resistance, $40 is likely the next price point for traders to monitor. Round numbers are often psychologically important to some market participants and $40 is slightly above DraftKings’ 52-week high of $39.35. Should the stock make its way to $40, analysts may be forced to lift price forecasts on the name because the consensus price target currently stands at $40.31.

On a related point, it’s worth noting that of the 31 analysts covering DraftKings, nine rate it a “hold,” indicating there’s room for upgrades that could potentially drive the stock price higher.

Some market observers argue the recent pullback by the high-flying gaming stock is healthy and could represent a buying opportunity. The recent retrenchment by DraftKings stock has been limited because the shares found technical support at an important price range, indicating it’s not in free fall.

The other side of that equation is that if DraftKings violates $34 on the downside, a sell-off could potentially accelerate.

Short Covering Could Help DraftKings Stock

While some well-known traders have abandoned bearish bets against DraftKings, short interest in the stock remains elevated. That could be a sign that if the shares rally to start 2024, shorts could be compelled to cover, thus 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.

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