A fundamental analyst lowered their price target on DraftKings (DKNG) to $30 from $50 and the stock did not make a new low. The stock is lower on the day but it has not made a new 52-week low which tells me that bearish news is not having the same impact as before. It seems like the bearish news is already discounted and this can mean an opportunity for nimble traders who can play a bounce.
Let's check the charts.
In this daily bar chart of DKNG, below, we can see that prices are in a downtrend below the declining 50-day and 200-day moving average lines. The trading volume has increased the past five to six weeks and can be a sign of a change of ownership from weak hands to stronger hands.
The On-Balance-Volume (OBV) line has been weak into early January. The 12-day price momentum study has made higher lows from late September telling us that the pace of the decline has slowed down. When compared to the price action we have a bullish divergence and this can foreshadow a bounce or counter-trend rally.
In this weekly Japanese candlestick chart of DKNG, below, we can see a possible hammer bottom reversal pattern at the beginning of January. Prices still need to have bullish confirmation this week. The weekly OBV line is pointed down but the 12-week price momentum study is improving.
In this daily Point and Figure chart of DKNG, below, we can see that prices reached and exceeded a downside price target of $32. Reaching a price target is not a buy signal but it can mean that technically oriented traders are not as bearish at current levels.
Bottom line strategy: It is not my typical strategy of buying a stock in a downtrend but I am only pitching the idea of a trading bounce for nimble traders who can get in and get out.
