Two Patterns, One Forecast for Casinos

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.

(click to enlarge)

Disclosure: Long LVS

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About Scott Redler 367 Articles

Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader.

Mr. Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Mr. Redler moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, continued to trade actively while working closely with all traders in the firm to dramatically increase performance.

Mr. Redler has participated in more than 30 triathlons and one IronMan, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business, Bloomberg, and he is a regular contributor to Minyanville and Forbes’ Intelligent Investing blog. He has been quoted in the Wall Street Journal and Investor's Business Daily, among other publications.

Scott received a B.B.A. in Marketing/Finance from the State University of New York at Albany, graduating Magna Cum Laude from Albany's School of Business.

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1 Comment on Two Patterns, One Forecast for Casinos

  1. Wynn has a much higher forward P/E than Sands… and much less of a project pipeline.

    Until they finish Wynn Cotai in 2015, Wynn is going to have to grow with what they’ve got… Sands will have the expansion of their burgeoning Singapore convention center completed by then.


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