Stock Trading Predictions & Technical Analysis: MGM

Friday, June 11, 2010

MGM - Bottom?

MGM - WAIT

When we look at MGM's daily chart we can see that MGM has been moving down in a major down trend since the beginning of May below the 20 day MA. This past Monday, MGM traded
below its 200 day MA for the first time since August 2009. On Wednesday, MGM tried to recover its losses and move back above its 200 day MA but failed and closed lower. MGM is now again just below its 200 day MA around $11.60 and will likely attempt again to move back above its 200 day MA. Despite the very bearish signal of MGM trading below its 200 day MA for the entire week, it may have bottomed and we should get a definite answer next week. The fact is that MGM has higher lows for the past 4 trading sessions which gives MGM the potential to drive back up the 200 day MA. MGM is currently a WAIT for a break back above the 200 day MA which may coincide with the break of the 20 day MA as well. Until MGM manages to break back above these two critical MAs, I would stay on the sidelines. With that being said MGM does have relatively decent support around the $10.50 level. However, if MGM does fail again next week to move back above the 200 day MA, I will consider this as a resumption of the down trend and therefore issue a SELL SIGNAL. One important thing to note is that although MGM has not given us a clear signal yet, the Dow Jones did close above its 20 day MA for the first time since the beginning of this major down trend. If the Dow Jones can manage to hold up and move higher, MGM will most likely follow along and move higher. Taking a long position with MGM at this level is a gamble, but one that is relatively safe with a stop loss of around -8%. However, two clear signals of a resumption of the down trend would be first to see MGM fail to move above its 200 day MA and then to close below this week's lows and below the $10.50 support level. If this support level is broken, MGM could accelerate very quickly down towards $9.00.

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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.