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Tickers in this Article: WYNN, MTN, LVS, MGM
Casino stocks have been hit hard over the past several years as the slumping economy, bear market and possible regulations cast a gloomy shadow on the group. Some stocks lost almost 99% of their value from peak to trough and were in danger of disappearing. However, as a group they found their footing in March and have rallied very strongly on a percentage basis since then. Many of these stocks are at a crossroads, and could provide a trading opportunity soon.

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Wynn Resorts (Nasdaq:WYNN) is one of the stocks that has held up the best in this group. WYNN was trading as low as the $14 mark just a few months ago, but has managed to rally well into the $70s since that time. WYNN was able to clear resistance first in July, and then again in September. It has settled into a nice pattern of higher highs and higher lows. Currently, WYNN is testing the September breakout area as it consolidates its recent gains. If it can hold this level, it could be poised for a continuation move back higher. (For related reading, check out A Prelude To Sinful Investing.)

Source: StockCharts.com

The price chart for Vail Resorts (NYSE:MTN) bears a resemblance to that of WYNN in that the stock remains above a base it cleared in the late summer. MTN peaked at $38.96 and came back for a retest of the base near $30. At this point, MTN remains in a trading range between these two levels, and it's best for traders to wait for a pattern to develop. Overall, this structure favors an eventual continuation higher, and at this point a break below $30 will be the clearest warning that something could be wrong.

Source: StockCharts.com

Las Vegas Sands (NYSE:LVS) lost approximately 99% of its market cap during the recent bear market. LVS dropped from the mid $100s down to a single dollar from late 2007 through early 2009. The obvious question is whether LVS is experiencing a relief rally or seeing improved prospects. Many of these stocks are facing serious hurdles, which are difficult for an investor to account for. Oftentimes, the clearest evidence lies in interpreting the price chart. LVS has rallied strongly from the March lows, and remains above a base it cleared in August. More recently, it has been consolidating those gains in a descending triangle, and should be watched for a break to either side. Typically these patterns favor continuation moves, so traders should be on alert if LVS can clear the $20-21 level.

Source: StockCharts.com

The chart for MGM Mirage (NYSE:MGM) is a little more difficult to interpret, as it has had some volatile moves over the past few months. Overall, it appears that MGM is still within the confines of a larger base spanning from the $5 - $14 area. It appears that there is a clear level of importance near $9, which if breached could lead to a retest of the $5 level. However, the more important level to watch here is the $14.25 peak high. A move above this level could cause a short squeeze and send shares much higher. (For related reading, check out Short Squeeze The Last Drop Of Profit From Market Moves.)

Source: StockCharts.com


Bottom Line
Overall, the casino stocks are loosely following similar patterns to each other. One thing they share is a clear level of resistance; clearing this could lead to much higher prices. While it appears there may be more time needed for these stocks to build on their current patterns, it is a good group to keep tabs on because of the possible trading opportunity. Because these stocks were punished so severely, there is the possibility that they could surge much higher under the right conditions. The key is to wait for a good opportunity to develop where risk can be limited.

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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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