Charts Indicate Casino Stocks May Be Worth a Gamble

Major casino stocks are trading at chart support

The odds have firmly been stacked against casinos during the pandemic as operators faced a sharp drop in patronage amid shutdowns, stay-at-home orders, and border closures. However, better-than-expected quarterly earnings after Wednesday's closing bell from industry giants Wynn Resorts, Limited (WYNN) and MGM Resorts International (MGM) provide hope that better times lie ahead.

Key Takeaways

  • WYNN and MGM both exceeded Wall Street's quarterly top- and bottom-line expectations.
  • Wynn stock may provide a buying opportunity at $88, where the price finds crucial support from a horizontal trendline stretching back over the past 18 months.
  • A retracement in MGM shares offers a high-probability entry point at $35.5, where the price finds a confluence of support from a multi-month trendline and the 200-day simple moving average (SMA).

The positive earnings reports coincide with both stocks nearing key technical support, increasing the likelihood of a turnaround in price action. Below, we review the quarterly earnings of these two iconic Las Vegas players and turn to the charts to identify high-probability entry points.

Wynn Resorts, Limited (WYNN)

Founded by Vegas casino identity Steve Wynn, Wynn Resorts owns and operates luxury casinos and resorts with properties in Las Vegas and Macau. Despite the $10.54 billion company posting a second quarter (Q2) loss of $1.12 per share, the figure came in narrower than the $1.41 loss Wall Street had expected and improved from the loss of $6.14 per share a year ago. Revenues of $990.11 million also surpassed analysts' expectations and grew more than 1,000% from the June 2020 quarter. The top line benefited from easing restrictions during the period, with the company reopening all of its Las Vegas gaming areas to 100% capacity on June 1. Wynn Resorts stock is trading 19.27% lower year to date (YTD) and has plunged nearly 30% since early May.

Wynn shares have remained in a steady downtrend since topping out at around $140 in early March. However, traders should look for buying opportunities at $88, where the price finds crucial support from a horizontal trendline stretching back over the past 15 months. To avoid catching a falling knife, consider waiting for a reversal signal at this level—such as a bullish engulfing pattern— before opening a long position.

Chart depicting the share price of Wynn Resorts, Limited (WYNN)

A bullish engulfing pattern is a white candlestick that closes higher than the previous day's opening after opening lower than the previous day's close. 

MGM Resorts International (MGM)

MGM Resorts runs entertainment resorts in the United States and Macau. The company behind MGM Grand, Mandalay Bay, Mirage, Luxor, and New York-New York disclosed a Q2 loss of 13 cents per share, less than the loss of 36 cents per share that analysts had forecast. The metric also improved from the year-ago reported loss of $1.52 per share. Meanwhile, the company generated $2.27 billion in revenues, an increase of 683% compared to the prior-year quarter. Geographically, MGM China drove top-line growth, reporting revenue of $856 million, an increase of 859% on a year-over-year basis. With a market value of $18.82 billion, MGM Resorts stock is trading 18.28% higher on the year but has slumped 13.83% over the past three months as of Aug. 5, 2021.

MGM's share price has remained mostly range bound since early April. The current retracement provides a high-probability entry point at the $35.5 level—an area on the chart that finds a confluence of support from a multi-month trendline and the rising 200-day simple moving average (SMA). However, like Wynn, active traders should remain on the sidelines until price action indicates that buyers have returned to MGM stock.

Chart depicting the share price of MGM Resorts International (MGM)

A retracement is a technical term used to identify a minor pullback or change in the direction of a financial instrument, such as a stock or index. Retracements are temporary in nature and do not indicate a shift in the larger trend.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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