Beware The Bounce on This Gambling Stock, Says Signal

Despite the technical warning, LVS call options are ramping up

by Lillian Currens

Published on Apr 1, 2019 at 3:09 PM

Casino stock Las Vegas Sands Corp. (NYSE:LVS) is higher, along with several sector peers, after Chinese gambling territory Macau reported well-received revenue data for March. As a result, the security is up 3.7% at $63.26 -- trading at a level not seen since early September. However, traders may not want to bet on LVS just yet. The equity just flashed a bearish technical signal that could precede a reversal lower, if history is any indicator. 

Taking a look at the charts, LVS stock has been on the rebound since bottoming at a two-year low of $47.39 on Dec. 24. The equity enjoyed a roughly 17% gain last quarter -- its biggest since September 2016 -- but prior to today's pop, a stiff ceiling at the $62 level capped any additional upside. Plus, the stock just came within one standard deviation from its 200-day moving average, after a lengthy period below the trendline.

Though this signal has only flashed on the charts one other time in the past three years, the stock suffered a 4.5% drop over the subsequent month, per data fom Schaeffer's Senior Quantitative Analyst Rocky White. A similar drop would drag LVS stock back below the aforementioned area of resistance at the $62 level, to around $60.44. 

LVS Chart Apr 1

Despite the technical warning, options bulls are already betting on the gambling name, with roughly 12,000 calls across the tape -- two times the average intraday volume, and nearly twice the number of LVS puts traded. It looks like most of this action is surrounding the April 62.50 call, with new positions being purchased for a volume-weighted average price of $1.52. If this is the case, breakeven for the call buyers at the close on Thursday, April 18 -- when the monthly options expire -- is $64.02 (strike plus premium paid), a level the equity hasn't touched in over six months.

Meanwhile, analysts are split on Las Vegas Sands. Half of the 10 in coverage consider the security a "buy" or better, while five have slapped it with a lukewarm "hold." Plus, the $65.44 consensus 12-month price target only represents a slim premium to current levels. 


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