Online sports betting stocks were big winners Wednesday after Cathie Wood’s ARK Invest increased its already sizeable stake in DraftKings Inc. (DKNG) across three of its exchange traded funds (ETFs).
- ARK Invest purchased additional shares in DraftKings to split across three of its ETFs.
- Look for buying opportunities in DraftKings shares around $54, where the price should find support from the neckline of an inverse head and shoulders pattern.
- Consider placing limit buy orders in Penn National Gaming (PENN) around $73, where the price finds support from a short-term horizontal trendline.
Wood, who former Bloomberg News editor-in-chief Matthew Winkler named the best stock picker of 2020, scooped up an additional 1,073,171 shares of DraftKings stock earlier this week to split across her ARK Innovation ETF (ARKK), ARK Fintech Innovation ETF (ARKF), and ARK Next Generation Internet ETF (ARKW). After its latest $60 million accumulation of DraftKings, Wood’s investment management firm now holds roughly $846 million worth of the stock based on yesterday’s $60.11 closing price.
Below, we take a closer look at DraftKings and one of its key competitors Penn National Gaming, Inc. (PENN), which also posted solid gains on hopes that it may be next to pop up on investment managers’ radar. We’ll also analyze the chart of each stock to identify high-probability entry points.
DraftKings Inc. (DKNG)
The digital sports entertainment and gaming company provide users with daily fantasy sports, sports betting, and iGaming options. It also designs and develops sports betting and casino gaming platform software for online and retail sportsbook and casino gaming products. The company stands to benefit from the resumption of live sporting events after the pandemic, along with rising demand for online gambling, such as poker, blackjack, and other popular casino games. Furthermore, a recent agreement with direct-broadcast satellite provider DISH Network Corporation (DISH) to bring DraftKings’ sportsbook and daily fantasy experiences directly to DISH customers nationwide opens the door to nearly 9 million potential customers. As of Aug. 26, 2021, DraftKings stock has a market value of $24.25 billion and is trading around 30% higher on the year.
DraftKing shares forged an inverse head and shoulders bottom between June and early August, with price convincingly breaking above the pattern’s neckline and the 200-day simple moving average (SMA) on Tuesday. Instead of chasing recent gains, traders should consider waiting for a retracement entry, given the relative strength index (RSI) sits above the overbought 70 threshold. Look for buying opportunities around $54, where the price should find support from the inverse head and shoulders’ initial breakout point.
An inverse head and shoulders, also called a “head and shoulders bottom,” is similar to the standard head and shoulders pattern, but inverted: with the head and shoulders top used to predict reversals in downtrends.
Penn National Gaming, Inc. (PENN)
Penn National Gaming offers customers online sports betting, online casinos, and digital bingo. The $12.53 billion company, formally known as PNRC Corp., announced earlier this month that it had aquired Canadian sports-betting firm Score Media and Gaming Inc. (SCR) for nearly $2 billion in cash and stock. The deal helps Penn National expand its footprint north of the border, just weeks after Canada recently passed a bill to legalize betting on single sports events, including football and hockey. Meanwhile, the company confirmed this week that it had been awarded a permit for sports betting in Arizona, just in time for the opening week of NFL betting on Sept. 9. Through Wednesday’s close, Penn National stock is trading 7.47% lower since the start of the year.
Since retesting a multi-month downtrend line last week, the Penn National share price has rallied sharply, with gains accelerating yesterday. Although the RSI indicator isn’t as overbought as on the DraftKings chart, the likelihood of a pullback has increased after four consecutive green days. Consider placing limit buy orders around $73, where the price finds support from a short-term horizontal line connecting several peaks and troughs over the past five months.
A horizontal line is often drawn on a price chart to highlight areas of support or resistance. This indicator is typically drawn along a swing high, or a series of them, where each high in the series stopped at a similar level. The same concept applies to swing lows.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.