Gambling Stocks Too Hot to Handle

Bullish volume in recent weeks paints a stronger picture than the price pattern. In addition, the log-scale channeled uptrend barely budged during last week's selloff and is showing no signs of letting up. So it makes sense for this stock to move higher in the short term and test the 200-day moving average, which is currently near $17.50.

Melco Crown Entertainment (MPEL) -- Daily eSignal

We need to travel across the Pacific to find the best-looking chart in the gambling sector. Melco Crown Entertainment(MPEL Quote) runs the Crown Macau Resort and other local properties. It came public in the low $20s in 2006 and entered a long downtrend that hit $2.31 in October. The stock tested that level in February and started to move higher.

The uptrend stalled at resistance near $5 in April, moved sideways for the next four weeks and then broke out on heavy volume. The rally paused at $6.40, with a pullback to support that attracted strong buying interest last week. The subsequent bounce should confirm the breakout and yield a continued uptrend into stronger resistance near $8.50. A note of caution: The company just reported earnings this morning.

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Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.

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Know What You Own: Other stocks in the gambling sector include Penn National Gaming(PENN Quote) and Isle of Capri Casinos(ISLE Quote).