Stock Trading Predictions & Technical Analysis: MGM - Surprisingly Outperforming the Market

Monday, January 25, 2010

MGM - Surprisingly Outperforming the Market

MGM - HOLD

Surprisingly enough, while the market in general has been moving down sharply last Friday with the Dow Jones shedding more than 200 points, one rare stock that moved up strongly was none other than MGM. In a rare occasion, while LVS and WYNN were pulling down along with the market MGM moved up +2.65%. This is relatively high for a day when most stocks are down sharply. The big sign of strength recently for MGM is the fact that it was not only up strong on a major down day for the market, but also that it was up while other casino stocks were down. This leads me to believe that something may be going on with the company itself. Today despite shedding most of the day's gains with the markets posting only modest gains, MGM still moved up another +3.18%, continuing to outperform other casino stocks. After seeing this anomaly on Friday, I decided to take a long position with MGM despite getting a STRONG SELL SIGNAL from the market's action. To hedge myself I also took a short position with GRMN which have given a SELL SIGNAL on Wednesday and Thursday. What I liked about MGM's action on Friday is also the fact that it pulled back to its 50 day MA before bouncing back up strongly, for which I considered a BUY SIGNAL. Today's continued move up also broke through the minor down trend. However, it's too early to say if MGM will manage to go any higher. I am currently watching MGM very carefully with the market looking to continue pulling back. Tomorrow will be a big test for MGM, as we should see the markets move lower again, and if MGM manages to post gains, stay flat or post minor losses this will add more strength to MGM. You have to remember that MGM has a beta of over 4, and when the market sheds around -2.00%, MGM should be down around -8.00%. This is why last Friday's action was so interesting. If MGM does manage to continue higher, it will be met with strong resistance at $12.50, while a move even higher should send it towards its strongest resistance level of around $14.00. As long as MGM manages to stay above its 50 day MA which currently stands around $10.65, MGM will remain a hold for its major trend. For the moment MGM's major trend is sideways. MGM did give us a BUY SIGNAL today in terms of its minor trend, but with strong resistance at $12.50 and the market moving sharply lower, issuing a HOLD on the major trend is more appropriate.

LONG MGM

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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.