Placing your bet on red has been the odds-on favorite in casino operator Las Vegas Sands Corp. (LVS) the last couple years. But for sidelined money, the game appears to be changing and favoring a bullish, long call spread in LVS stock.
In late April, shares of Las Vegas Sands plunged 9% following earnings of 45 cents, missing the consensus by 16 cents. LVS attributed the weakness to its key, overseas Macau gaming market.
But while many investors seemingly walked away from the proverbial table in disgust over LVS stock’s results, Las Vegas Sands did actually hold its own relative to its peers in a difficult operating market.
What’s more, as the undisputed leader in the trifecta gaming markets of Singapore, Las Vegas and Macau (complete with supportive cash flow to weather the industry’s volatile cycles), the future certainly looks good for LVS stock.
And judging by the overall LVS chart action thus far in 2016, the bullish trend could begin right here.
LVS Stock Weekly Chart
The basis for a bullish trend change in LVS stock rests on a couple technically constructive factors.
First, a lower-low, double-bottom test of 62% support dating back to 2009 was confirmed back in mid-January in LVS.
Next and also bullish, LVS stock supported the technical low as it successfully broke above down-channel resistance which had been in place for nearly two years.
Last, and notwithstanding Las Vegas Sands’ bearish earnings report acting as the catalyst, LVS stock has nonetheless formed a bullish higher-low pattern above the prior bearish trendline.
Looking forward, LVS’ next move should establish a new higher high above the $54.80 set in March. At the same time, any price movement below May’s technical low of $44.07 would change the described bullish dynamics and require exiting LVS.
LVS Stock Long Bull Call Spread
Open your position with a bullish July $47/$50 bull call spread for 85 cents.
Compared to a share price of $46.20, LVS needs to rally to $47.85, or 3.5%, at expiration to break even. An 8.2% move to $50 would maximize the bullish vertical’s profit potential to $2.15, or 253%.
With expiration still several weeks out, there’s time for this limited risk strategy to capture the required upside in LVS stock. But, lacking an earnings catalyst during the spread’s life cycle, I like the idea of implementing money management.
For instance, should LVS stock trade higher, it makes sense (and possible added “cents”) to adjust into a low-cost butterfly and initiate a 50% money stop to counter any adverse stock movement.
The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. Mr. Tyler currently holds no positions in any of the securities discussed in his personal or managed family accounts but may initiate, for better or worse, a position in two or more business days following the publication of this article.