Macao stocks have struggled this week after a major Chinese bank removed ATMs from the Special Administrative Region, citing the need for higher security units in response to a government crackdown on capital exiting the Asian giant. Market players sold the news because the island’s ATMs offer convenient portals to move money off the mainland, triggering fears that fewer yuan will reach the gaming tables.
The timing couldn’t be worse for Wynn Resorts, Ltd. (WYNN) and Las Vegas Sands, Corp. (LVS), two of the island’s biggest stakeholders. Both stocks have rallied in 2017 after an extended period of weak revenues due to overbuilding, a weaker Chinese economy and more restrictive government policies. While it’s too early to tell if the crackdown will end current uptrends, it’s a wake-up call telling shareholders to take partial profits in case the pullback turns into a full-scale rout.
WYNN Long-Term Chart (2002–2017)
The stock came public near $11.50 in October 2002 and headed into an immediate uptrend that solidified its position as one of the top performers of the mid-decade bull market. The rally peaked at $164.48 in 2007, giving way to a pullback that accelerated to lower ground during the 2008 economic collapse. Selling pressure finally ended in the mid-teens in March 2009, marking an incredible 92% decline.
The subsequent recovery wave slowed in 2010 and picked up steam one year later, nearly completing the 100% round trip into the prior decade’s high in July 2011. Sellers then took control, dumping the stock into the mid-80s in 2012, ahead of a strong bounce that completed a multiyear cup and handle pattern. It broke out in the second half of 2013, lifting to an all-time high at $249.31 in March 2014.
It failed the breakout six months later, dropping in a nasty decline that finally ended near $50 in October 2015. It tested new support in January 2016, completing a double bottom, ahead of a rally that stalled near $100 mid-year. That level contained the upside into a March 2017 breakout that filled the April 2015 gap between $116 and $130 in the days before this week’s bearish news. It will now take a selloff through the 50-month EMA at $114 to break the positive technicals.
LVS Long-Term Chart (2004-2017)
The stock came public in the low-40s in December 2004 and sold off to $29 in the fourth-quarter of 2005. It then joined the mid-decade bull market in a healthy uptrend that posted an all-time high at $148.76 in November 2007, ahead of an orderly pullback that turned into a selling panic when bankruptcy fears escalated in the second half of 2008. The decline reached an all-time low at $1.38 in March 2009, completing a 99% decline.
A bounce into 2010 stalled in the mid-50s, with that resistance level limiting gains into a 2013 breakout that generated strong buying power. The upside fizzled out at $88.28 in March 2014, yielding a decline that continued into a 3-year low in the first quarter of 2015. A strong bounce into March ended at the 50-month EMA while a pullback into the fourth quarter got bought, ahead of a breakout that stalled in the mid-60s in December. The stock held a February test at new support near $50, with that level marking the current dividing line between bull and bear power.
The Bottom Line
Wynn Resorts and Las Vegas Sands sold off earlier this week after a big bank pulled its Macao ATMs, citing the need for more restrictive policies due to a government crackdown on cash outflows. While it’s too early to tell if this will mark a major turning point, it makes sense to stay alerted to new developments while taking partial profits after recent sector gains.
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>
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