Wow, next week is the second installment of the Wealth 365 Summit. I’ll be kicking off the Tuesday morning if you get time to dial in!
For this week, there are some nice setups in the gambling stocks and this week a few of them started to pop. Luckily, a few are still setting up. Whether you stalk a pullback on the early movers or watch for the rest of the group to start accelerating is up to you, but these look like strong setups.
WYNN broke out this week with a big surge. Two days into the week, the chart is already up 13%!
The SCTR ranking is a technical method of comparing how strong a stock is compared to its peers by market cap. This is like a sports ranking system for the NFL or NHL. The companies with the strongest price action move to the top of the list. WYNN has just moved up to being in the top 25% of the stocks. That is a very bullish sign for me. Notice the last time the SCTR ranking surged above 75. The stock went on to be a top performer for most of the next two years. That also coincided with a weekly PPO moving above zero.
Looking at the chart of Las Vegas Sands, the chart shares some similarities with the WYNN chart above. The SCTR surged above 75 this week. It also broke out to new 6-month highs. The relative strength also broke out to new six-month highs shown in purple. The Percentage Price Oscillator (PPO) measures momentum and just moved above zero for the first time since the summer of 2018 as the stock came off all-time highs.
The next chart is Melco Entertainment. The similarities are all over the chart compared to WYNN and LVS. One of the ways stocks go on runs is when their industry peers all start to become top performers at the same time.
Great Canadian Gaming has been a stunningly good chart. It forgot to pull back with the rest of the gaming stocks in October. The stock continues to be a strong performer and looks to be ready to start the next leg higher.
The SCTR ranking has pulled back to 50 a couple of times in the last year and resumed the uptrend. We are there now. The purple shaded area compares a stock’s price performance to the S&P 500 ($SPX). The ratio is right on the uptrend line. I would expect the stock to continue the uptrend. If the stock fell below the relative strength trend line I would be concerned and a move below the 40-week moving average on the price panel would confirm an exit for me as the stock recently dipped below that level for the first time. If this is not going to hold as support while the other gaming stocks move, I would be hesitant to keep owning it. Another positive is at the bottom of the chart and that is the PPO indicator. This indicator has stayed above zero for years. Any change in that behavior would be an exit for me.
What is nice about the current setup is the tight stop can be placed right under the recent low of $49. If this can’t hold, I do not want to own it either.
Lastly is The Stars Group chart that has a great setup but has not had a breakout yet. This company owns a lot of on line assets like PokerStars.net and Full Tilt Poker. This chart has not had a breakout to three-month highs yet. If the stock starts to run, this would be the kickoff. A breakout above the prior highs here would suggest all the indicators are about to turn up. I do like the strong volume recently while the chart is trying to base.
In general, these gambling stocks look like they are setting up for a run. It would seem the names associated with Macau are starting to move with the improvement in the Chinese economic data. But a rising industry can lift all boats. There might be room at this table for the rest of us! Keep your stops in place as the dealer always can draw a strong hand.