Casino stock Wynn Resorts (WYNN) has suffered a losing streak of epic proportions. Since peaking just shy of $250 in early 2014, WYNN stock has cratered to a lowly $66, losing three quarters of its value in the process.
Bottom fishers have suffered defeat repeatedly as each and every rescue attempt was short lived. For those wondering when the pain will end, I bear good news: The price action in WYNN stock looks better than at any time since the harrowing descent began.
While such progress doesn’t guarantee an end to the pain for WYNN shareholders, it gives them more hope than anything else that’s cropped up in the charts over the past two years.
Here are the top three bullish developments in WYNN stock:
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First, a classic symmetrical triangle has formed over the past quarter revealing a prolonged tug-of-war between bulls and bears.
While touted as a neutral pattern, the triangle has bullish overtones in WYNN since the high-end hotel company has known nothing but falling prices in recent years.
Second, the basing action in Wynn Resorts has gone on long enough to flatten the previously declining 50-day moving average. That’s a plus. The 50-day moving average hasn’t based out this long since the bear market began in earnest.
Third, volume climaxed at the start of the symmetrical triangle and that price low ($50.96) has held ever since. The heavy uptick in volume could suggest institutional buying that should keep WYNN stock aloft going forward.
Monday’s bloodbath is obviously weighing on WYNN, but it remains within the confines of the triangle. The key level to watch for deploying bullish trades going forward is the descending trendline that has characterized resistance over the past few months (red line in chart).
If WYNN can breach $71.50 in the coming days, feel free to place bullish trades with conviction.
WYNN Bull Call Spread
Buying the March $70/$80 call spread for $2.95 offers a straightforward way to roll the dice on further upside in WYNN stock over the coming months.
The max risk is limited to the initial $2.95 debit and will be lost if WYNN sits below $70 at expiration. The max reward is limited to the distance between strikes minus the net debit, or $7.05, and will be captured if WYNN stock can rise above $80.
By risking $2.95 to make $7.05, call spread owners are looking at a potential 239% return. Now that’s a windfall worth a shot.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
