Buy The Dip On This Sports Betting Stock

DraftKings (DKNG) has been choppy since its Mar. 27 two-year high of $49.57, with 2.8% post-earnings bear gap on May 3 not helping matters. Last seen down 3.3% to trade at $42.42 and on track for a fourth loss in the last five days, the silver lining is that this pullback has the stock near a historically bullish trendline.

DKNG has come within one standard deviation of its 80-day moving average, defined for this study as having traded north of this trendline 80% of the time in the past two months, and in eight of the past 10 trading days. This has occurred four other times over the past three years, after which the stock was higher one month later for three of those instances, averaging an 8.9% return. A move of similar magnitude would put the shares back above breakeven for the quarter and resume the channel of higher highs carved out in the last 12 months.

Options are looking affordable, too. The stock’s Schaeffer’s Volatility Index (SVI) of 38% ranks in low 3rd percentile of its annual range, meaning options traders are pricing in low volatility expectations at the moment.