The most recent earnings season has further reinforced the class system we have seen in terms of the casino stocks. The three big names- Las Vegas Sands Corp. (LVS), Wynn Resorts Limited (WYNN) and MGM Resorts International (MGM)- all trade very differently. There is a clear rank and file, but at various times each stock sets-up for a measured technical move Today we are seeing two of them set up with very different patterns, but one expected result.
Wynn is the clear-cut leader in the group, which was further evidenced by its stellar Q4 2010 earnings report. The company has great exposure to Macau, where revenues continue to explode from VIP and mainstream gamblers. The stock jumped sharply a week ago following the company’s earnings, and since then has consolidated in a very tight range in the upper end of that igniting bar. Watch this stock about $129.50 for another move, which seems inevitable. In addition, there are plenty of analyst price targets in the $140 range, which is also the destination of the measured technical move.
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As technical traders we always love long-term consolidation patterns that provide defined risk-reward for a trade. Las Vegas Sands Corp. (LVS) has been one of the strongest stocks since March 2009 lows, surging from less than $2 to the $50s. Over the last few months, however, the stock has formed a drawn out wedge pattern in its upper range. That range was getting tighter into earnings, and we were excited about a potential move.
However, LVS disappointed with its earnings report, and the pattern never triggered. It continues to play second fiddle to big brother Wynn. However, the stock held the lower trendline of that wedge pattern after earnings, so the pattern remained intact. We are bullish on the casinos fundamentally, especially the ones with good exposure to Macau like LVS. The pattern is getting ever tighter, and a break above $50 will trigger the breakout.
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Disclosure: Long LVS