Penn National Gaming (PENN) – Get Report is one of the most enthralling stocks of 2020.
Shares were beaten down to sub-$4 in March as investors worried about the company’s liquidity.
On Friday, Penn stock hit a high $76.62, up more than 20-fold from its 52-week low of $3.75.
Is that the end of the run? While shares are bound to correct eventually and even as they are hitting a key retracement mark, analysts aren’t necessarily giving up on the name.
On Sept. 15, Penn stock received a buy rating and $75 price target from Craig-Hallum. Rosenblatt Securities recently assigned an $80 price target, while Stifel Nicolaus just slapped an $85 price target on the name, the highest on Wall Street.
If Penn were to climb to $85, it would represent another $12 of upside or 16.5%. The question is whether it can get there. Let’s look at the charts.
Trading Penn Stock
Daily chart of Penn stock.
Chart courtesy of Stockcharts.com
Because of the year-to-date range, the chart is not the most visually appealing. However, it is necessary to see the monstrous rally from the March lows and the breakout to new all-time highs in August.
While the move to the upside has been powerful, I wouldn’t say it’s been parabolic. After breaking out over $40, Penn consolidated reasonably between $50 and $55 for about a month.
As the 20-day moving average held as support, shares eventually broke out over the 161.8% extension near $60, climbing to the two-times range extension near $74 a few days later.
If long, I would consider taking at least some profits into this area. While a close over the two-times range extension could trigger a squeeze up to $90, we don’t want to be careless, either.
Should Penn stock get to $90, it could put the 261.8% extension in play up at $96.51, followed by $100. Statistically speaking, a close over $90 gives investors favorable odds of reaching $100 (although it is a probability, not a guarantee).
As for bulls looking to buy, I’d be on the lookout for a dip to the 20-day moving average and a retest of the 161.8% extension.
The ultimate pullback — while painful — would be a decline back toward $40. There it finds the major breakout from the February highs that would likely be a solid buying opportunity for bulls. Although, on a pullback of that size, we would surely need to re-examine Penn stock.
For now, watch for a close over $74.61 (the two-times range) or for a dip to the 20-day.
