DraftKings Just Fell Through A Key Support: What's Next For The Stock?

A cluster of sports betting legalization news at the start of 2021 saw the popularity of companies in the eGaming and online betting sector soar.

DraftKings Inc DKNG reached a high of $74.38 on March 22 amid investor hype in the sports betting sector.

With legalization in new states having slowed, and Canada’s federal online betting bill tied up in its senate, news flow for companies such as DraftKings, Penn National Gaming Inc. PENN and Score Media SCR has slowed.

Traders will have their eyes back DraftKings Friday, however, as it's set to report first-quarter 2021 earnings before the opening bell.

When DraftKings printed its fourth-quarter 2020 results, its revenue had grown 146% from the same period last year, totaling $322 million and beating the Street estimate of $233 million.

Trading a company's earnings through common shares or options can be tricky because a stock price doesn't always rise in response to a beat or fall in response to a miss. Looking at the chart can help technical traders with possible levels and direction, however.

Related Link: How to Buy DraftKings Stock

The DraftKings Chart: DraftKings’ stock has been trading in a bullish descending channel since March 25, making consistent lower highs and lower lows on the daily chart. On Thursday morning, selling pressure entered the stock and caused DraftKings to lose a key support level at the $55 mark, but it's still trading within the descending channel.

DraftKings is trading under the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day EMA, both of which are bearish indicators. The stock is, however, trading above the 200-day simple moving average (SMA), which indicates overall sentiment in DraftKings remains bullish.

Bulls want to see DraftKings break up out of the descending channel with strong bull volume. If DraftKings can break up from the channel, it has room to move up towards the $64.50 level.

Bears want to see DraftKings stock continue to trade down in the channel until it loses support at both the 200-day SMA and its next support level at $50.17.

DKNG Price Action: Shares of DraftKings were trading down 7.7% at $51.85 at publication time.

(Photo: Draft Kings)