Much has been written about the demise of Atlantic City, where one casino has already closed and three more may follow suit over the next month. The ambitious, ill-fated Revel Casino Resort is scheduled for auction and is likely to fetch a fraction of its $2.4 billion cost should bidders emerge.
On the other side of the world, there are fewer high rollers to be found in Macau, where casino revenues fell 3.6% in July. Deutsche Bank analyst Carlos Santarelli reduced his third-quarter forecast for Macau gaming revenue and expects VIP revenue to drop by 10%.
Atlantic City's decline is partly due to a number of gambling establishments that have emerged in adjacent states in recent years, including a dozen in Pennsylvania. Macau is being pressed by new competition from the Philippines. Couple that supply/demand dynamic with an economic slowdown in China and lower incomes in the U.S., where the median household income has declined for five consecutive years according to the U.S. Census Bureau, and a troublesome picture emerges.
Under these circumstances, it's not surprising that charts of casino gaming stock also appear troubled. Wynn Resorts (WYNN) is trading beneath its 200-day moving average (red) for the first time in nearly two years. WYNN's moving average convergence-divergence indicator (MACD) flashed a sell signal last week (highlighted yellow). The stock has formed a large topping pattern, with support at $190 (green line). A break of that level would create a new year-to-date low, likely attracting more sellers.
MGM Resorts (MGM) has less exposure to Macau and is doing well in Las Vegas, but its chart is only marginally better that WYNN's. MGM has maintained its position above its 200-day moving average (red), but just barely. A similar topping pattern has formed. Along with a sell signal (shaded yellow) MGM's MACD indicator shows four-consecutive higher lows as the stock trends sideways, a phenomenon known as bearish divergence.
Last, but not least, we have Las Vegas Sands (LVS), which looks similar to the two previous charts with one important exception: it has already broken support. LVS also features bearish divergence, a MACD sell signal, and a dark cross. The stock's 50-day moving average (blue) crossed below its 200-day moving average (red) in early July (arrow), which foreshadowed the break of support. The next support level for LVS is $55 (red dotted line).
Technically speaking, MGM is the best of the three and LVS is the worst. But all three patterns appear similar. This leads me to believe that all three are ultimately headed lower, so I'd avoid any temptation to buy the dip, particularly on LVS.
At the time of publication, Ponsi had no positions in any of the securities mentioned.