Wynn Resorts - Here's When to Hold 'Em, and When to Fold 'Em

Ed Ponsi

The pandemic has harmed casinos in a profound way. For example, Wynn Resorts Limited (WYNN) has seen its shares fall 46% year to date. With the number of Covid-19 infections rising around the world, it would seem that the odds are against a recovery for the casino sector in the near future. 

However, Wynn's chart is telling a different story. Or in this case, singing a different tune. With a hat tip to Kenny Rogers, let's go to the charts. 

wynn
Wynn Resorts (WYNN) via TradeStation

WHEN TO HOLD 'EM

The pullback in shares of Wynn has created an interesting technical setup. Wynn has formed a bearish pattern known as a descending triangle, but the stock has stubbornly refused to break down. The arrows represent occasions when the stock bounced up from support. 

Initial resistance is located at the bearish trendline (black), so if Wynn gets close to $80, I'd take a partial profit. The next resistance level beyond that is just above $90 (red dotted line). That's a great place to take additional profits. 

WHEN TO FOLD 'EM

As we pointed out earlier, Wynn has a ton of support at $69 (black dotted line). If that line breaks, the stock will hit a six month low. 

That type of breakdown is likely to attract additional sellers, and feed upon itself. If investors limit their losses to a break of that $69 level, then the potential risk vs. reward scenario for Wynn is very appealing. 

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Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here