The casinos are starting to get interesting again as their recent consolidation appears to be drawing to a close. The casinos as a whole have been good performers for the latter half of this year, but had been experiencing some profit-taking over the past several weeks. As recently as a week ago, some casino stocks appeared to be in danger of entering a deeper correction.
Las Vegas Sands (NYSE:LVS), for instance, fell below the $44 level briefly last week as it broke below its 50-day moving average. LVS found buyers in this area and only partially closed a gap formed in late October. LVS was able to climb back into its base and is currently testing its 20-day moving average. If it can stabilize in this area it could set the stage for an attempted breakout. Traders should watch the recent low; a move below this level could force recent dip buyers to exit.
Wynn Resorts (Nasdaq:WYNN) is another stock that appeared to be in trouble recently. WYNN fell beneath its 50-day moving average in early December and fell under $100 per share. However, WYNN held above its prior base and buyers stepped in to propel the stock back over the $100 level, and its 20- and 50-day moving averages. While WYNN may not be ready for a true breakout yet, it did confirm this level as support, and traders should continue to watch it. (For more, see The Anatomy Of Trading Breakouts.)
Melco Crown Entertainment (Nasdaq:MPEL ) has been following a similar pattern in that it began to fall under support earlier this month, but quickly recovered as buyers stepped in. MPEL fell under its 50-day moving average and under lateral support near $5.90 as it corrected its prior run. It surged after the initial breakdown and also cleared the channel it was following in the correction. Much like WYNN, MPEL will likely need more time to consolidate before a true breakout attempt, but the recent price action was positive in that it confirmed a key support level. Traders should monitor the recent low moving forward.
MGM Resorts International (NYSE:MGM ) is one casino that has been showing few signs of weakness. It has been steadily setting higher lows the past few months while stalling out near $14. It was able to clear $14 a few sessions ago and is clearly leading in this sector. Traders should focus on the $14 level moving forward as a pullback into this level should find buyers.
The Bottom Line
While many of the casino stocks remain in a vulnerable position, the strength in MGM and the recent buying near support on the others is revealing institutional support for the group. The group as a whole has been consolidating for several weeks and often a false breakdown marks the end of a consolidation as the last of the sellers are flushed out. While it is not a certainty that this group is ready to move higher, there are enough clues to suggest that their existing consolidation may be drawing to a close.
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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.