In any game of chance you take any opportunity to put the odds in your favor. With swing trading, there is still an element of chance but those opportunities for an edge come more frequently. With DraftKings stock giving multiple chances this year for gains, it's been a bet worth taking more than once.
Swing Trading Example: DKNG Stock
DraftKings stock has already had three ventures on SwingTrader this year. A previous column outlined its entry on the March follow-through day (1).
Taking a third off into strength (2) helped keep the trade positive when it eventually exited after a 6% gain nearly had a round-trip (3).
Thought the stock ended up coming back that day, DKNG stock fell further before it found support at its 50-day moving average line (4) and easily could have turned into a losing trade.
DraftKings stock ended up making a nice move without us, but a lot of that came from a 15% gain after its earnings report (5). Since we don't hold through earnings, we can't very well bemoan missing these types of moves. If anything we can breathe a sigh of relief in the multiple cases where the stock goes the other way with big gaps down. Those types of losses can wipe out a lot of our small gains.
Another Chance And Another Gain
Rather than ignore the stock after its big earnings move, we kept it on our radar for another potential chance. That came a couple weeks later when DraftKings stock bounced at its 21-day moving average line with accompanying volume (6).
A similar story played out as we took a third of the position off once we hit a 6% gain on a strong gap up (7). The profit taking helped relieve some pressure as DKNG stock fell well off its highs by the end of the day.
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Again, we saw a healthy gain (this time to the tune of 11%) come all the way back to our entry and force our exit (8). Also like our previous trade, the early exit saved us from further destruction of gains which easily could have turned the trade into a loss.
Can The Magic Continue?
Even after playing the stock twice, there isn't reason to think it might not run again. After another bounce from its 21-day moving average line DraftKings stock joined SwingTrader for its third time this year (9).
It's a current trade on our SwingTrader product as of this writing and we've already taken our first third off with a 4% gain.
So what's our strategy going forward? No reason for alterations. We can give the remaining two-thirds room to grow. If we see an undercut of recent lows, like the entry day low, or a surrender of our current gains an exit can almost be assured.
If we get more gains, we might take another third if we close in on 10% gains or get extended from our moving averages. That could leave a final exit at a close below one of the short-term moving average lines or even further extension beyond the norms.
In either case, by sticking to a familiar playbook, we've helped ourselves to multiple winning trades in DraftKings stock.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.
