Our first round draft pick just might be done resting and is ready to get back on the field. Here’s my take on DraftKings ($DKNG) (June 04, 2020)
DKNG
Okay, I know I said I wasn’t going to do DraftKings ( NASDAQ: DKNG ) anymore and I was very sincere about that. However, here’s the deal: We’ve seen this stock rebound off of the 8-day moving average before; like how many times? All along here the stock has essentially been, for a moment, below the 8-day there and the 8-day there. Other than that it just really hasn’t fallen below the 8-day EMA.
Now, there is no question this stock is getting tired. It has been a monster stock, since here when it was at $20.00 on the first of May, it’s doubled since that time, so this has been an absolute killer move. But we don’t know whether it’s done yet or not and we still have half an hour in the market to go as I am recording this video. This stock is so close to the 8-day moving average that I feel comfortable saying, “Hey, if you want to take a speculative position on an extended stock you have an opportunity to do it with really low risk.”
Now, if you are putting a stop at about 37.80 that is 5 or 6 percent below where the stock is now, which, frankly, 5 or 6 percent on a stop for me, because I really, really want to be really precise with my entries; if I am selling for a 5 or 6 percent loss that is kind of on the high side, at least for me. I will sell for 2, 3, 4, percent more often than I would like but I will just make sure that I get as good of an entry as I possibly can and always look to see what my dollar risk is when I am setting a stop, when I’m deciding to go in here.
I think because of the nature of this stock, again, it’s gone up 100 percent since the first of May. Because of that, this has the potential to make a boatload of money; it can go up really fast on a percentage basis. So you have to say all right, I’ll give it a little more room. But the cool thing is, you have got a pretty good entry, right here is where the support level is.
So you are buying the stock here; you see where the support level is and then you are putting your stop right there. And when are you going to get stopped out? You are only going to get stopped out if it turns out that this actually was the top and then the stock just continues to go.
So this is, again, this is a low-risk entry point. We have seen this stuff before several times and we may see it again. But I don’t want to see it in the rear-view mirror; I want to see it going forward. So that would be my trade on DraftKings ( NASDAQ: DKNG ).
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