DraftKings (NASDAQ: DKNG) has seen a decline of 7.89% this month, putting the stock at risk of breaching key support levels. This comes after a strong showing in 2023, where the stock saw gains of 209.48%, making it one of the best-performing gaming equities. The recent pullback has led some market participants to trim or eliminate their positions in the stock.
According to Schaeffer’s Investment Research, DraftKings is now approaching potential support at the $34 region, which is a 38.2% Fibonacci retracement of its all-time highs and 2022 lows. Additionally, the stock has tripled its 2022 close and is hovering around its early August post-earnings high and rising 50-day moving average. These technical indicators suggest that $34 is a critical support level for the stock.
In terms of resistance, $40 is the next price point for traders to monitor. Should the stock break through this level, analysts may be forced to lift price forecasts on the name, potentially driving the stock price higher. Currently, the consensus price target stands at $40.31, indicating room for potential upgrades by analysts.
While the recent pullback may present a buying opportunity, there is a risk that if DraftKings violates the $34 support level, a sell-off could accelerate. Short interest in the stock remains elevated, but some well-known traders have abandoned bearish bets against DraftKings. If the stock rallies in 2024, shorts could be compelled to cover their positions, further fueling upside potential.
Overall, the recent decline in DraftKings stock has brought it close to important support levels, presenting both potential risks and opportunities for traders and investors. As the stock continues to navigate these key levels, market participants will be closely monitoring its movements in the coming weeks.