LVS – Upgrade Turns Las Vegas Sands’ Charts Loose

On Wednesday, casino resorts and convention centers operator Las Vegas Sands (LVS) saw a series of upgrades of its credit rating, which gave LVS stock a technically sound pop that resulted in a breakout to fresh year-to-date highs. The news also took its competitors — such as MGM Resorts (MGM) and Wynn (WYNN) — higher with it.

lvs-stock-chartsAmong the upgrades, rating agency Standard & Poor’s upped LVS’ corporate rating by one notch to BBB- from BB+, which importantly moved it into investment-grade territory. S&P has deemed the company’s outlook “stable,” meaning there won’t be any upgrades or downgrades in the near future. The rating agency credits the upgrade on Las Vegas Sands’ expected debt levels for the coming years, which it said should allow for an adequate cash balances for its needs.

S&P furthermore doled out a BBB- rating to LVS’ proposed $750 million revolving credit facility and $2.5 billion term loan, and raised its rating on senior secured credit facilities to BBB- from BB+.

Investors cheered the news of the credit upgrade and rallied LVS stock by almost 4% on big volume.

The company, whose properties include The Venetian in Las Vegas and Sands in Macau, has seen its stock price rise significantly since the 2009 capitulation low. On the long-term chart, looking back to LVS stock’s all-time highs from October 2007, shares are reaching an important technical level.

After cratering close to 99% from October 2007 to the lows in March 2009, where LVS stock was trading around a measly $1.50, shares began a miraculous recovery of more than 6,200% into Wednesday’s highs. While the percentage terms of this massive five-year swing are nothing short of breathtaking, more importantly — as it relates to the outlook for the stock — is the reference area at which LVS stock has now arrived.

With Wednesday’s pop to new year-to-date highs, LVS shares also have reached the 50% retracement area of the entire 2007-09 selloff. The good news is that, barring any quick bearish reversal, the stock now has room to get to the next upside target closer to the $90 area in the medium term.

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On the daily charts, Las Vegas Sands’ Wednesday rally pushed it out of a 1.5-month consolidation phase. This newfound upside momentum could lift LVS stock toward the $80 area in coming weeks, which is something traders can try to take advantage of using simple trailing stops.

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So, both the longer- and nearer-term charts for LVS look constructive. That puts the winds at investors’ backs, sure, but it’s not a reason to get complacent.

When upside momentum eventually dies out again, LVS stock will inevitably settle into consolidation mode — something that investors with medium-term time frames must acknowledge.

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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.

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