Shares of luxury resorts and casinos operator Wynn Resorts, Limited (NASDAQ:WYNN) rallied nicely on Monday along with other casinos like MGM Resorts International (NYSE:MGM) and Las Vegas Sands Corp. (NYSE:LVS). As a result, these casino stocks also firmed up their charts which had been looking better in recent weeks.
Whether this has brought about a new, longer lasting uptrend in WYNN stock is too early to tell … and frankly, it’s not my focus here.
Instead, what I care about is the defined line of resistance that Wynn Resorts if flirting with, as a break above it could lead to a quick 10% to 15% move.
For casino operators with a presence in Macau, China (China’s equivalent of Las Vegas), the going has been anything but pleasant for the past 15 months. Gambling revenue in Macau has been on the decline for the past year after a few years of steady growth before that. Analysts are quick to call out reasons for this decline, among them a slowing of the broader Chinese economy and tighter “controls” on the use of certain debit cards.
When I last discussed a trade idea on WYNN stock on May 11, the stock looked ready for a better bounce but never managed to get above the $118 area for more than a nanosecond, thus never triggering my trade. The stock then proceeded to drop another 20% into late June, reaching deeper oversold readings that now again look to have the stock in a better position for at least a multiweek rally.
WYNN Stock Charts
Moving on to Wynn’s stock price charts, we see that from a multiyear weekly perspective, WYNN has tumbled some 60% since March 2014, and in late June it reached the lower end of a support zone that stretches back to summer 2012 and summer 2010. WYNN stock has now also been in oversold territory from this angle since late 2014, which historically is a long stretch without shares making a better rally attempt.
Closer up on the daily chart, we see that positive divergence between momentum and price has been in the making since March, which shows seller exhaustion. Furthermore, note the selling exhaustion candle on June 29, which was quickly followed by strong buying in early July. Now, WYNN is trying to overcome horizontal resistance from June, which was former support.
Active investors could look to buy WYNN stock at $110.50 or higher for an initial price target at $118, followed by possibly $130. Any mayor bearish reversal would call the trade off. Also note that Wynn is scheduled to report earnings on July 29, so trading positions should be reduced or cut entirely before the announcement.
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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.
