MGM - SELL
Unfortunately for MGM, despite hitting a new 52 week high, the move was not strong enough to have a clear breakout over the resistance level. Some stocks will some time manage to move a little higher but the volume is not there to support the move and as a result it retreats. For bow MGM is still in an up trend but one that has slowed down since it has now broken its 20 day MA. Keep in mind that MGM has moved up nearly +90% in just 4 and a half month from around $9.00 to nearly $17.00, so a pullback is not necessarily a bad thing. MGM being a high beta stock can have sharp declines despite still trending up like now. MGM's next major support level is at $14.00 at the 50 day MA for which MGM has been trending over since the beginning of this up trend in September. For now MGM is a SELL until we hopefully see a bounce back at the next support level which would be around $14.00. For now I believe that the market is experiencing a short term healthy pullback. I think MGM will fly high only once we get a clear break out over $17.00 in one day with heavy volume with a major price move. MGM seems now to have too much resistance around the 52 week high to just manage to move slowly above it. If MGM does break its 50 day MA, it will have broken its up trend and could go as low as $12.00-$12.30 around the 200 day MA. The long term trend now seems to continue to indicate that MGM is in a long term sideways trend until it clearly breaks heavily above $17.00. MGM has been trending in a long term side ways trend since May 2009 between around $9.00 and $17.00, with the range tightening in the last year between more towards $12.00 and $17.00. Despite this trend, MGM being a high beta stock with a lot of volatility had a lot of opportunities arising to make heavy gains. My stop loss order of MGM got obviously triggered a couple days ago and I still manage to exit my position with a nearly +20% gain. For now I am waiting to see a bounce back hopefully at $14.00 with a short term target around $17.00 which could hopefully turn into something more if it breaks this heavy resistance level. Keep in mind that MGM has strong support at $13.75-14.00 and a bounce back around this level would be an interesting and potentially good new entry point. MGM does also have minor support at $14.50 and $15.00 which I don't think will hold. Keep in mind that when MGM does give us a sign of a bottom it will most likely touch or fall below one of its major support levels before it bounces back up on the same day; this is a sign to look for. However, it is usually best to wait until the next day to see if MGM does in fact close higher before entering into a new position. For now I still like MGM a lot as a trading stock rather than a long term investment. It is much more profitable to enter and exit those short term trends, that is until it breaks heavily above $17.00. My previous MGM analysis and prediction stands, it only seems that we will have to be more patient before the break out occurs. MGM is still a stock that trades heavily based on technical and therefore makes it easier to catch trends. But we have to accept that we will not always be right. But I don't mind being wrong while still cashing in gains. That is why setting stop losses is extremely important, because you never know when the stock will start pulling back, and you want to be able to cash in at least part of what you've earned. In my case, for now, I will not sacrifice more than -8%. Even if I might get whipsawed at times, I believe that in the long term this strategy is beneficial. Ideally you want to have your stop losses to be set below major resistance level by if possibly up to -3% to -5% while not losing more than -8%; however this is easier said than done.
