Betting Stock for Bull Traders

The stock just crossed a key long-term layer of resistance on its monthly chart

Nov 8, 2023 at 11:23 AM

DKNG

Subscribers to Schaeffer's Weekend Trader options recommendation service received this DKNG commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

DraftKings Inc (NASDAQ:DKNG) stock is fresh off a sharp post-earnings bull gap, after the sports betting name posted upbeat earnings and raised its annual revenue forecast. Now, with the shares above $29.40, which is three times the SPAC IPO opening price of $9.80, it looks like a good time to weigh in on DKNG with calls.

The stock crossed above its 36-month moving average on its monthly chart, which has acted as resistance since its July peak. Plus, DKNG’s gap higher took out the call-heavy 30 strike.

DKNG WT Chart November 82023

Though shorts have been covering their bets since the equity’s May 2022 trough, short interest still represents 5.4% of the stock’s available float. Should this pessimism continue to unwind, DraftKings stock could see even more tailwinds.

Furthermore, options are affordable at the moment given the stock’s post-earnings volatility crush. DKNG’s implied volatility (IV) is now lower than 98% of readings from the past year, and below its 63-day historical volatility (HV).

Our recommended January 2024 call has a leverage ratio of 5.3, and will double on a 19.4% pop in the underlying shares.

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