Will the market land on red or will green come up next? Whatever the case, I think you should leave your trading less open to the whims of chance and spread your bets smartly across the table in casino stocks Wynn Resorts (NASDAQ:WYNN), Las Vegas Sands (NYSE:LVS) and MGM Resorts (NYSE:MGM).
Let me explain.
Monday’s session boiled down to Trump versus economic growth concerns. And after more than a few misplaced predictions of what the day’s headlines would mean to Wall Street, a stalemate of 0.09% in the S&P 500 by the closing bell looked like a game of craps for bulls and bears alike.
But not in casino stocks.
My view is that the market’s day-to-day vagaries shouldn’t dissuade investors. Instead, I’d recommend playing the game like the house and spreading your bets across WYNN stock, LVS and MGM for increased odds of being paid out.
Wynn Resorts (WYNN)
It’s looking like a house of cards for shares of Wynn Resorts. Back in late January investors placed bets on green in WYNN stock following the casino’s better-than-expected Q4 earnings report. Now, however, the table is stacked against those bulls.
After initially continuing to rally alongside the market, WYNN unsuccessfully challenged the 200-day simple moving average in late February and has been on a losing streak and demonstrating relative weakness ever since.
And now Wynn’s price action is looking even more supportive for shorting this casino stock for big-time profits.
Our recommendation is investors short a breakdown of price congestion that’s formed beneath key lateral resistance stationed in bear territory below the 200-day simple moving average.
Specifically, I’d recommend a short in WYNN stock below $114. This entry looks to avoid lesser breaches that could turn into bear traps. I’d also suggest the use of a trailing stop of 7%, which is placed marginally above resistance while smartly minimizing exposure.
Las Vegas Sands (LVS)
Earnings can be a big gamble as LVS stock bears who overstayed their welcome found out in late January. The casino reported worse-than-expected profits and sales punctuated by weaker-than-expected sales from its Macau operation.
But after a handful of sessions of bouncing around slightly lower, shares of Las Vegas Sands established new relative highs and LVS stock has continued to trade above pre-earnings prices, putting those bears underwater or being forced to fold their hand.
The price action looks even more like the color of money for bulls when examining LVS stock. As detailed in the daily chart, prior resistance has been successfully tested for support. And now shares are setting up for a second breakout attempt above the 200-day simple moving average following an unsuccessful challenge back in February.
Our view is LVS’s next closing penetration of the long-term moving average will prove the charm for bulls buying stock. I’d personally allow for a bit of wiggle room and wait for shares to trade through $60.50 before making a purchase.
To prevent any long positions in this casino stock from possibly winding up like WYNN, I’d set a stop below $57.30. This keeps exposure down to just over 5%. It also respects the recent testing of support and appreciates that a third challenge may not be nearly as charming for bulls.
MGM Resorts (MGM)
Not that I’m saving the best for last, but a bet on continued red appears to be in order for MGM stock right now. Unlike the other casino stocks, which are on the radar for placing bets, MGM is ready to make coin for bears today.
Despite narrowly topping the Street’s top and bottom-lines and raising its dividend by 8%, investors’ immediate reaction to this gaming stock’s results was overtly bearish. Shares of MGM not only dropped 6.36% on the session, but also gapped cleanly below the 200-day simple moving average.
As the daily chart of MGM stock shows, the initial response did find modest technical support and shares rallied back above the 200-day simple moving average. Unfortunately, that was as good as it would get for bulls. And the game has increasingly become a one-sided affair favoring bears shorting shares.
With Monday’s price action narrowly breaking below bearish lateral congestion of about one-month in duration and supported by a favorable stochastics set-up, MGM stock’s downtrend is in position to be shorted today.
To maintain even more promising odds in this casino stock, I’d recommend using a stop above $27.75. This exit effectively manages exposure in MGM stock by keeping risk under 8% and allows for modest wiggle room above 200SMA resistance. At the same time and if all goes well for this bearish bet, fresh lows could be in the cards.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. 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. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.