CZR Has Been Heading Higher Since Mid-March

It could test resistance at $10

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This morning, I am recommending a bullish trade on Caesars Entertainment Corporation (NASDAQ:CZR), the casino-entertainment and hospitality-services provider.

From a seasonal perspective, April is typically one of the most bullish months of the year. In fact, the market has moved higher every April for the last 13 years in a row. So far, the major indices are following that historical trend. And there are other bullish signs.

The Federal Reserve is likely to hold off on raising interest rates further, and the bond market is also acting well. With the yield on the 10-year Treasury dropping to the 2.50% level this year, investors are likely turning to stocks to find more attractive returns.

Wage gains — one of the aspects the Fed looks at for signs of inflation — were reported at just 0.14% for the month, so I don’t think this month’s report is going to push the Fed to become more hawkish again or raise interest rates anytime soon. That’s another positive for the market.

 

Daily Chart of CBOE 10-Year Treasury Note Yield (TNX) — Chart Source: TradingView

And this morning, the Bureau of Labor Statistics reported that the economy added 196,000 jobs in March, with the employment rate holding steady at 3.8%. This was a strong rebound from February’s dismal reading of just 20,000 jobs added.

There are still some risks in the market, which I will cover, but CZR has been heading higher since mid-March, and I think now is a good time for a long call.

Slowing Global Growth

As I mentioned above, there are some concerns out there.

Europe is not looking good. In particular, growth in Germany — the biggest economy in the European Union — is showing signs of slowing down. Forecasts for the economic growth rate in Germany were revised much lower this week to just 0.8% versus the previous forecast of 1.9%.

Europe in general is slowing as well and is at risk of falling into recession. That is also a risk for markets in the United States, as about 40% of S&P stocks do a significant amount of international business with those countries.

The other big story surrounding slowing growth is unfolding in China. The country is notorious for putting out economic data that often looks better than what is actually happening, so I wouldn’t be surprised if the China’s economy is doing even more poorly than what is being reported.

But even with these market concerns, I think the attitude is generally bullish. Despite some of the negatives that are still lurking around the world, the forecast for the U.S. economy remains pretty strong.

CZR Broke Above its 50-Day Moving Average

If we look at the daily chart for CZR, we see there was a drop in mid-March after earnings. The company actually reported a positive surprise, so I think there may have been some profit taking, which sent the stock down to the $8 level.

Daily Chart of Caesars Entertainment Corporation (CZR) — Chart Source: TradingView

 

Since then, the stock has been heading higher, crossing its 50-day moving average (MA). The 200-day MA has acted as resistance in the past, but if the bullish momentum can push it above that level, CZR could test resistance at around the $10 level.

We don’t actually need it to beat that resistance level to collect a profit on this trade, and because we’re in a bullish environment, I think the stock could get up to its old resistance level. For that reason. I’m recommending a bullish call option on CZR.

Buy to open the Caesars Entertainment Corporation (CZR) June 21st $9 Calls (CZR190621C00009000) at $0.90 or lower.

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