It’s time for another Sunday Sector discussion… “The Macau Effect”
The word out of Macau on Friday about the better than expected gaming revenues lit a fire under the gaming stocks from the open. In the past, news in this sector has produced very nice gains for some of the stocks in the sector. But the gaming sector can also be fickle. The gaming stocks should be in play this week and may produce some very nice gains for traders who work the sector. The trick is to know which horse to place your bet on.
I watch the Stocktwits stream and see all the gaming stocks being posted by many people. Most of the charts look technically sound and have nice breakout patterns but traders may find that there will be some disappointments with failed breakouts or lack of performance of some of the stocks in the sector. Personally, I like to trade on solid catalysts like this especially when it relates to the company’s bottom line. My advice is to take some time and do your homework. Its easy to find setups in the gaming sector, but this is more a Macau play than an across the board gaming play. In fact, an argument could be made that the Macau effect is taking away revenues from the U.S. Markets. With that being said, focus your trading on the companies that will benefit from this catalyst directly and not the ones that are just hitching a ride with the sector move.
The companies with Macau exposure include WYNN, MPEL, LVS and MGM
The companies with only U.S. exposure that are just going along for a ride with the sector include BYD. ISLE, PNK, PENN and FLL .
I won’t post the charts because they have all been posted numerous times on Chart.ly . I personally initiated positions in WYNN and MPEL on friday and will add on strength.
Sometimes when there is a lot of attention being paid to a sector directly, its often good to see what collateral stocks might make a stealth move while all eyes are looking at the most well known trading stocks. This week I will also have my eye on IGT who is a major supplier of the electronic gaming systems to the Macau marketplace. The IGT weekly chart is cleaner to look at. A break of 16.80 could see 19 or more.
Another supplier to the Macau casino operators is SHFL. Bring up a daily chart for the close in view. I think the monthly chart gives a solid picture of where it has been and where it could go if 52 week highs are broken.
Have a good week and keep an eye on this sector. Even though the market may rest a bit here, the gaming stocks often will ignore a pullback in the general markets. As always, trade what you see and not what you feel or hear.