As long as DraftKings ($DKNG) is still working…I’ll keep covering it. (May 28, 2020)
DKNG
DraftKings ( NASDAQ: DKNG ); how did we get into this trade? It really started here when I thought I missed my boat. The stock is up here, it’s really running, I don’t think so, and then the stock kind of drifts sideways here and it pulls back. Then this is starting to look like a pretty decent, not the greatest entry but certainly one where I can predict or I can protect my capital; because I can see how it trades along this 8-day exponential moving average, the green light. And every time it hits that it bounces off, it doesn’t do it that often here and it bounces. And so the stock is finally down to here and then it is starting to bounce.
So the idea is, I can buy this little dip and keep a fairly tight stop. And then on this day, it is confirming that the stock is holding. It is not confirming that it’s about to go higher, it is just confirming that the stock is holding. Boom, now we have it and now you are thinking, all right, I see what’s happening. Do I buy more of this stock?
You have to understand what’s going on, this is a stock that’s in very, very strong demand, you can just tell by the trend. So the idea is, all right, well I am chasing it but I will buy some more. And so you buy some more and you start doing this, you start looking at the intraday highs and lows. Obviously, it’s higher than it was yesterday, and then here, again, the stock traded below the close from the prior day by like 3.5 percent. This is a volatile stock but it was well above the prior day’s intraday low and then it traded and closed well above the prior day’s intraday high.
Then we get another move higher, and this is today, where again, we get a higher intraday low and a higher intraday high. And so what we are doing all along the day is selling calls and selling puts. Just today, this morning, we bought back the $35.00 calls on this stock because the stock was running so much. I think it was just barely above $35.00 when I bought these back and took a loss on them, a small loss but a loss, but the stock just keeps going up. And then we are still short the puts and so right now we’ve got long stock and short puts. And as long as the stock keeps going up making higher intraday lows and higher intraday highs, that’s what I want to see.
As long as a stock will not go back down and surpass or fall below the prior day’s intraday low, as long as it won’t do that, then you know that there is emotion and demand behind this stock. So that is what we are looking at here. I think the stock just continues to move. Just continue your thing, let it work. But watch today’s intraday low, that’s 34.62. So I would say that if the stock falls below 34.60, that’s just a little bit below intraday low, then that’s a change in character. And it’s a change in character that you want to pay attention to and that’s when you might start lightening up.
Free Chart