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Wednesday saw the market go through lots of turmoil with the exchanges being shut down for technical reasons. That just added to the uncertainty and downward pressure already being applied to stocks after a drop of almost 6% by the Chinese market.
Given the circumstances, it wasn’t surprising to see the list of names from my bearish scan outnumber the bullish scan by a wide margin.
Even with the large discrepancy between the two lists, something that jumped out at me was seeing two major casino operators appear on the bearish scan – Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN). Both casino stocks have been in downtrends since March 2014.
The gaming industry hasn’t been performing well, and both Las Vegas Sands and Wynn Resorts have a presence in the Chinese territory Macau. In recent months, with the Chinese stock market falling, that has certainly had an impact on these two stocks.
With bearish signals coming on both stocks, how would I choose which one to play? The first thing I would do is look at the charts. Looking at the daily charts, I see that Las Vegas Sands has just hit the upper rail of a trend channel that goes back to the high in March 2014, while Wynn has quite a bit of room from its current price to the upper rail of its channel. Both stocks are overbought based on the daily stochastic readings and had similar readings on their 10-day RSIs.
Turning our attention to the weekly charts, we see a similar story with the trend channels, but the weekly oscillators are quite different, with Las Vegas Sands showing both stochastic readings well out of oversold territory and Wynn still in overbought territory. The 10-week RSI for Las Vegas Sands is above the 50 mark ,while the 10-week RSI for Wynn is down at 38.11.
Given the current conditions of the charts, I would choose to short Las Vegas Sands over Wynn. The main reason for choosing Las Vegas Sands is that it has already hit the upper rail of its trend channel, whereas Wynn has a ways to go before it gets to the upper rail of its trend channel. Secondly, the fact that the slow stochastic readings are still in oversold territory for Wynn makes me less attracted to the stock as a shorting possibility.
One other thing that I checked was the sentiment readings for both stocks, which were relatively even. Las Vegas Sands has a higher short interest ratio – 5.3, versus 3.4 for Wynn – but analysts like Las Vegas Sands a little better, so that was pretty much a wash.
Given the circumstances, I would short Las Vegas Sands with a target of $45 on the downside and a buy-stop in the $58 range, above the 52-week moving average. The upper rail of Wynn’s channel is too far away for my comfort, and the 52-week moving average is well above the current trading level.
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