Penn National Gaming Stock Primed for New Highs, According to Technical Indicator

Posted on: February 27, 2021, 03:42h. 

Last updated on: February 28, 2021, 03:53h.

Though it recently pulled back from its record, Penn National Gaming (NASDAQ:PENN) stock remains one of the hottest gaming equities. Some technical analysis indicates the shares can deliver more near-term upside and perhaps notch new highs.

Penn stock
The Barstool Sportsbook at the Ameristar Casino in Colorado. Operator Penn National Gaming could see its stock rally. (Image: Denver Business Journal)

Shares of the regional casino operator declined 3.80 last week, but there was some good news. The Pennsylvania-based gaming company said it entered into a pact with Rivers Casino & Resort for “second skin” market access to New York.

That’s a fundamental factor. But investors may want to keep an eye on the charts.

Specifically, the equity just came within one standard deviation of its 40-day moving average, after spending the majority of the past four months far above the trendline,” notes Schaeffer’s Investment Research. “According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, four similar signals have occurred during the past three years. Penn National Gaming stock enjoyed positive returns one month after 67 percent of these signals, averaging a notable gain of 23.4 percent.”

In financial market parlance, standard deviation is a measure of volatility. It gauges how widely a security’s prices fluctuates from the average price.

“If prices trade in a narrow trading range, the standard deviation will return a low value that indicates low volatility,” according to Fidelity. “Conversely, if prices swing wildly up and down, then standard deviation returns a high value that indicates high volatility.”

Potentially Potent Push for Penn Stock

In financial markets, it’s often said that “history doesn’t always repeat, but it often rhymes.” That saying is worth remembering as it pertains to Penn and the aforementioned indicator.

If Penn experiences a move similar to prior ones after coming within a standard deviation of its 40-day moving average, the shares would vault to the $143 to $144 area — representing fresh all-time highs — from current levels. The stock closed at $115.78 on Feb. 26 after jumping 5.55 percent in sympathy with rival DraftKings (NASDAQ:DKNG), which delivered an upbeat revenue forecast.

The $140-plus price area isn’t out of the question for Penn. Its previous high of $129 was set earlier this month. Last week, JPMorgan analyst Joseph Greff upped his price target on the name to $142, well above the consensus call of $110.60.

Other Positive Indicators for Penn

Data from the options pits also signal bullishness brewing for the gaming stock.

“Options traders, however, are piling aboard the bullish bandwagon. This is per Penn National Gaming stock’s 50-day call/put volume ratio of 2.48 International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 80 percent of readings from the past year,” says Schaeffers. “This means this heavy penchant for bullish bets is unusual.”

As for fundamental catalysts, Penn has the potential to deliver those in the form of more market entry/robust share for the Barstool Sportsbook mobile app, and ongoing recovery for regional casinos.