This Surging Stock Could Be Going International
Following the market’s big down day on Monday, news of an acquisition proposal is setting up one of my favorite stocks for success.
For weeks now, I’ve been telling anyone that will listen that I believed the market was on the precipice of a big drop off.
Not because of any particular catalyst, but just normal market mechanics.
When you have a market that’s moved as high and as fast as it has this year, it’s natural to need a selloff in order to attract new buyers.
On Monday, we started to see the beginning of that pullback, as the S&P 500 fell as much as 2.86% from Friday’s close.
And despite the market’s resilience in remaining fairly level yesterday, I don’t believe the selloff is over.
But that’s not to say you should despair. After all, the market moving lower means there’s going to be a ton of new profit opportunities for us at discounted prices.
In fact, yesterday saw a fantastic chance to take a quick profit on one of my favorite stocks right now.
And it won’t be the last one for this name – especially after this week’s news.
Where’s the money?
If you’ve been following along with Profit Pregame lately, you’d know that I love the potential that DraftKings Inc. (DKNG) holds.
I won’t bore you with the details again, but basically the case for DraftKings is this…
More and more states are legalizing sports gambling.
Gambling revenues are up over the last two years.
The NFL season – which draws the greatest amount of betting of any sport in the U.S. – is now upon us.
And soon, DraftKings could be adding lucrative market share around the globe to the growing list of reasons to be bullish on this stock.
Yesterday, reports surfaced that DraftKings had approached Entain – a British gambling company which is licensed to operate in more than 20 countries – and made an offer to acquire the firm for more than $20 billion.
The move comes as an effort o keep up with some of DKNG’s biggest rivals that are snatching up international gambling companies. For example, Caesars Entertainment, Inc. (CZR) completed a $3.9 billion deal to buy William Hill, an Entain rival, earlier this year.
Shares of DKNG had been on a roll for the last month, gaining more than 23.5% since August 20.
But the market’s reaction to the potential buyout, plus the recent market-wide selloff are giving us a great chance to buy DKNG at a price we haven’t seen in more than a month since the stock started to make its big move up.
How do I get some?
The terms of DraftKings’ offer to Entain are reportedly for a mostly stock deal at a 30% premium to Entain’s current valuation.
As a result, DKNG fell to an extremely oversold level yesterday morning following the news.
Traders and investors began moving in at discounted price on this hot stock. In fact, my scanners picked up on one particular option that some of the biggest institutions on Wall Street were buying up, which gained roughly 60% in just one hour.
Currently, DKNG shares are trading more than 18% lower than their high from earlier this month. This could be one of the last opportunities to buy this stock at these levels before the next earnings reports potentially reveal a huge increase in revenue.
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In the Spotlight: The most important number in the market
September has been a rough month for the market, with investors having lost an estimated $1.8 trillion already this month.
But if this one key indicator is hit, things could get much worse.
The S&P 500 has already dipped below it’s 50-day moving average, and many are eying the next support level as one that will be crucial for the index to hold.
A number of individual stocks in the S&P have already crossed below their 200-day moving average, and analysts worry that if the index itself crosses that threshold, we could be in for a deep correction.
The S&P’s 200-day average is still roughly another 6% away from being touched, but is being viewed as the last line of defense before the market begins a correction of 10% or more.
Keep a sharp eye on that support level in the days to come.