Many of the casino stocks have been perking up lately and may be worth monitoring over the next few days. Often, it pays for a trader to monitor the behavior of leaders in a specific sector as they will often move ahead of the pack. By monitoring the leaders, traders can look to those leaders' peers for a possible sympathy move.
Upscale casino stock Wynn Resorts (Nasdaq:WYNN) has been a leader in this sector since its IPO in 2003. WYNN has been steadily moving higher over the past few months and recently cleared a level of resistance. It cleared the $130 level in early April after a failed breakout attempt in March. It had been consolidating in a tight range above this level until a brief dip a couple of days ago. The dip was bought and WYNN is now looking like it will attempt a move higher. Traders should keep a close eye on the recent low near $129 as an important support level.
Vail Resorts (NYSE:MTN) is a stock in the casino sector that is worth watching for a sympathy move higher. MTN has been in a consolidation for several months after a strong rally late in 2010. It has been bound to a lateral trading range since late January and may have ground out a solid base between the $47.50 and $50 level. The $50 level is a key area to watch as it represents a lateral resistance area; it also intersected a trendline, marking its most recent rally attempts. A break above this level could signal an end to the consolidation. (For more, see 5 Strong Stocks Poised For A Breakout.)
Another casino stock worth watching is Melco Crown Entertainment (Nasdaq:MPEL). MPEL cleared its base early in April and survived a quick test of support near $8. That level remains the key area to watch for support moving forward. MPEL has a nice price void all the way up to the $12 range and could gain some momentum on any market strength.
Penn National Gaming (Nasdaq:PENN) is another casino stock that recently cleared a base. However, PENN quickly stalled out and is currently in the process of pulling back to test the prior base for support. It is actually under a key level near $37.50, but stocks will often dip under key levels in an effort to shake out weak hands. The key is to watch how PENN deals with this area in the coming days. A sharp hammer or reversal would be a very positive sign. (For more, see Candlesticks Light The Way To Logical Trading.)
The Bottom Line
Watching sector leaders is very important for traders. The axiom "what's good for the goose is good for the gander" very much applies to the stock market and if a leader is making promising moves, these will often trickle down to the other members of its sector as well. Several casino stocks are showing signs of a possible rally, which may be signaling an accumulation of this group by institutions. Traders should watch these stocks over the coming days; if the markets can rebound, this group may offer a great trading opportunity.
At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.