Shares of Wynn Resorts, Limited (WYNN) surged to a three-year high earlier this week after the company beat quarterly revenue estimates by nearly 9%, posting a 29.9% year-over-year increase. A resurgent Macau casino and resort environment drove the impressive results, attracting heavy buying interest that has also lifted competitor Las Vegas Sands Corp. (LVS). That company reports fourth quarter earnings after Thursday's closing bell.
Macau's gaming revenues are booming once again, rising a healthy 22.6% year over year in November. This follows a period of limp growth, driven by a Chinese government crackdown on capital flight as well as an August typhoon that buffeted the island with an estimated $1.42 billion in losses. Wynn's local market share has now risen to 17%, according to CEO Steve Wynn, while generating almost $4 million in daily operating profits. This bodes well for continued upside for the stock in the coming months. (See also: Wynn Resorts: The Gaming Stock for the Chinese Market.)
WYNN Long-Term Chart (2007 – 2018)
A multi-year uptrend topped out at $164.48 in 2007, giving way to a steep slide that accelerated during the 2008 economic collapse. The stock found support at a five-year low in the mid-teens in March 2009 and turned sharply higher into the new decade, recouping losses at the same trajectory as the prior decline. It completed the round trip in July 2011 and turned lower once again, carving the handle in a multi-year cup and handle pattern.
A 2013 breakout caught fire, lifting the stock to an all-time high at $249.31 in the first quarter of 2014. The subsequent pullback picked up steam into the fourth quarter, failing the breakout while setting off major sell signals. Wynn stock got sold aggressively through 2015 and into January 2016, when it finally bottomed out near $50. The first wave of the subsequent bounce stalled near $100 a few months later, generating nearly a year of basing action, ahead of a strong 2017 uptrend that has now escalated into 2018.
It took nearly 16 months for the uptick to cross the .382 Fibonacci sell-off retracement level, with buying momentum cutting quickly through the .50 and .618 boundaries. The stock is now trading less than 15 points under the .786 retracement, which has narrowly aligned with a 2014 double top breakdown and the psychological $200 level. This placement suggests limited upside before a steep pullback generates a more advantageous buying opportunity. That could come on a pullback that tests the year-long rising lows trendline, currently situated just above $160.
LVS Long-Term Chart (2007 – 2018)
Las Vegas Sands nearly went bankrupt during last decade's historic downturn, turning higher from $1.38 in March 2009. That buying impulse stalled after crossing the 50% sell-off retracement level in 2014, building a top in the upper $80s. The stock fell into the $30s in 2016, testing five-year horizontal support, and turned higher into 2017. Price action spent most of the year working through resistance in the low $60s, finally clearing that barrier in November.
The stock has rallied from the upper $60s to $78.57 in the past three weeks, crossing the .786 Fibonacci retracement level of the 2014 into 2016 decline. It is now extremely overbought and likely to build a trading range across this harmonic barrier, working off extreme technical readings. The unfilled Jan. 16 gap between $71 and $72 will come into play if the stock enters a correction, which appears likely in the coming weeks. As a result, market players may wish to stand aside after this week's earnings report, waiting for a pullback into the $69 to $71 price zone.
The Bottom Line
Wynn Resorts and Las Vegas Sands have gained considerable ground this January, with booming Macau operations underpinning the rush to higher prices. Both stocks look overbought following vertical buying spikes, telling informed participants to look for buying opportunities at lower prices. (For additional reading, check out: How Millennials Will Impact the Casino Industry.)
<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>