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Brand Face-Off: MGM Resorts International vs. International Game Technology

Evaluating MGM and IGT from technical and sentiment viewpoints

by 4/1/2014 2:01:16 PM
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MGM Resorts International (NYSE:MGM) and International Game Technology (NYSE:IGT) may have a lot in common off the charts, as both are in the casino industry; however, the two have taken completely different routes on the technical front. Today -- amid news that gaming revenue in Macau spiked 13% in March -- MGM has popped 2.6% higher to trade at $26.55, and is now up 6.7% week-to-date (and only 8.3% away from five-year-high territory), while IGT is shuffling around breakeven at $14.11, within earshot of its annual low of $13.31, tagged last Thursday. From a longer-term perspective, the story remains the same. MGM has more than doubled in value over the past 12 months, with help from its 80-day moving average, which pulled the stock from its most recent backpedal last week. Meanwhile, IGT has shed close to 27% over the past six months, with its 50-day moving average halting most of the stock's rally attempts since last September.

Daily Chart of MGM since April 2013 With 80-Day Moving Average

Daily Chart of IGT since September 2013 With 50-Day Moving Average

While MGM appears deserving of bullish praise, the equity has received more than its fair share of bearish sentiment from its critics on Main Street. For starters, MGM's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.39 ranks in the 97th annual percentile. In other words, option players have bought to open puts, relative to calls, at a near-annual-high pace during the past 10 weeks.

Furthermore, short interest on MGM climbed 22% during the most recent reporting period, and now makes up a healthy 8.8% of the stock's available float. An extension of the equity's upward trajectory may trigger a short-squeeze scenario (and a capitulation of option bears), which could ultimately create additional technical tailwinds for MGM.

Elsewhere, option bulls have been ignoring IGT's technical struggles, and have bought to open nearly six calls for every put during the past month, resulting in a 20-day ISE/CBOE/PHLX call/put volume ratio of 5.71. Should these speculators begin to hit the exits, IGT could come face-to-face with additional technical stress.

What's more, short interest on IGT dropped 29.3% over the past two reporting periods, as short sellers unwound their bearish bets on the equity. As such, the current number of shares sold short -- 16.7 million -- is equivalent to 3.6 days' worth of pent-up buying demand, at IGT's average daily volume, which doesn't leave much room for more short-covering activity.

All in all, after analyzing the sentiment toward MGM Resorts International (NYSE:MGM) and International Game Technology (NYSE:IGT) on Main Street, it seems safe to say MGM is this week's winner of our Brand Face-Off, as the stock appears poised to tackle higher highs in the near term.

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