Shares of Wynn Resorts, Limited (WYNN), the casino gaming giant, are trading in a familiar pattern. The stock has been consolidating in recent months and is stuck in one of my favorite price patterns – a symmetrical triangle.
A symmetrical triangle price pattern, also known as a wedge, is signaling for a major breakout for the casino operator any week now. The pattern is simple to spot. It looks like a wedge, or arrow shape, and has a falling resistance level and rising support level. Take a look:
You can see how prices have tested but not broke through these key levels for years now. Since they are converging together, prices will eventually break out. And when they do, the pattern tells us to expect a massive more for the stock.
When we have symmetrical triangles, you can predict the size of the breakout based on the height of the pattern. Since the move on this pattern is so massive, $150 per share from the bottom to the peak, we'll use the more recent price data. We can start with a bottom in December at $90 per share, to the following next peak, at $150. That's a difference of $60 per share. That tells us to expect a near 60% move once prices break out.
The only thing left is to determine the direction of the breakout. You can wait until prices break out, but usually, the breakout day is a significant move itself. So you don't want to miss out on it if you don't have to.
Luckily, triangle patterns also have another characteristic that usually comes up – prices tend to break out in the direction shares were already heading in. I went back to 2014 on the chart so you could see that this stock is well below its previous peak. This shows us that the stock is trending lower, which means that we can expect a breakout to the downside.
The Bottom Line
If you have to bet on where Wynn Resorts stock is heading, the symmetrical triangle pattern tells us that it's likely to move much lower from here. Based on the height of the pattern, we are looking at a move of $60 per share once a breakout occurs, regardless of the direction.