Here’s how you estimate the upside on DraftKings ($DKNG) – March 1, 2021
DKNG
I want to look at DraftKings ( NASDAQ: DKNG ) today. First, if you are looking at my videos on a regular basis you will see so many lines and boxes and things on them. I typically just keep them there because it jogs my memory of what I was looking at. But the reason that I do this is just to kind of keep myself honest; draw boxes around price ranges, lines for support and resistance, and things like that. So I am not just kind of looking at a chart fresh each day without some kind of institutional memory, so to speak. It is just something that I do.
Some people would take the exact opposite approach and say, no, I don’t want anything on my chart when I look at it because I want to have a fresh view every single time I look at it. If that works for you, great. The reason that it doesn’t work for me, though, is because I think there is psychology in trading, and it’s not just to look at the price but it’s to be mindful of what today’s price action is doing to the emotions of people that got involved in the stock earlier.
These are just the types of things that I do; such as, if you look at today, you see the big breakout today, right? Before that, this was the trading box right here. Before that, you see where this is where the bulk of the trading took place. And so what we are looking at, it’s kind of like Darvas Boxes only not stacked quite so neatly, but you will see a trading range for a long period of time and then the stock breaks out to a higher high.
And then certainly the lows are not as low as they used to be so you have kind of a higher box here. And then the stock ultimately breaks out again and then pulls back a bit here. And now you have got like, this is support, this is resistance up here, and so you’ve got a new box. So these things are kind of stacking on top of each other as time goes by. And so finally we get this, I can’t predict where it’s going to be, but I am kind of looking for the next box.
We could see something like this, so we should actually see, on any pullback, we should see a pullback find support, 63.00, 62.00, certainly 60.00. If it doesn’t find support at 60.00 then this is a failed breakout. But we look at this type of thing, just keep getting new frames of reference so you can say, oh, the stock is high. Well, what’s high? Relative to what? Well, it’s high in the box that I just drew. If I am drawing this kind of box, well, the stock isn’t high, it is actually kind of low, so everything is relative, everything is relative.
But as I see this stock now, let’s just get to the trade. This is my biggest position right now. I don’t have a lot of big positions, I only own a few different stocks, but this is the biggest one because it’s the one that is confirming my thesis. The others are kind of, I don’t know, maybe, it’s not doing anything bad but it sure isn’t doing anything great either but I will go ahead and hold the position. If they were all doing that then I would just close them and go wash the driveway or something. This is working, I am sticking with it.
But what I am really looking at in this is this bigger picture right here, this whole thing. Because you have the high here and along here. Now we are getting just a breakout here, but this is, to me, really compelling. You will see a series of higher highs to where now this is kind of actually squeezing here within this pattern. I think if the stock moves above 70.00 this could run quite a ways further. How much further could it run? Well, I will show you how I measure this kind of stuff and it’s just the back of a cocktail napkin measurement. We look at this high and this low. What we’ve got is about 44 percent but we will say $30.00. We will say $30.00 is what we have but it’s about 44 percent.
So now we look and say, alright, once the stock breaks out from this level then this is $30.00 here so I will look for a run of $30.00 to the upside and that gives me about 94.50. So I will back off and say, my price target on this is $90.00. It’s not a prediction, it is me saying, I want to stick with this stock until it hits 90.00. And then at that point, I will make some decisions, maybe I will take some off the table, maybe I will add to it.
But that’s my assessment as I think the stock has a lot of room to go. I look at it on the weekly chart and I see a very compelling picture in that way too. I see a lot of upside here, from here, that’s another 30 percent. Is that going to happen tomorrow? Doubtful, but do I think it will happen? Shoot, I hope so because I have got a good position in it.
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