There were very few stocks not taken down in Friday's broad market decline. The number of stocks above their 50-day moving average dropped from over 60% to under 35%, a breadth indicator that reflects a high degree of participation in the pullback.
Wynn has not been immune to the decline in Macau gaming revenues over the last two years. In fact, it experienced a 75% drop in share price from its 2014 high to its 2015 low. This year, it completed a double bottom on the chart and broke above the long-term downtrend line and then followed that up with a bullish 10-week (50-day) moving average "golden" cross over the 40-week (200-day) moving average. Since then, it has been trading in a horizontal channel and oscillating around the 10-week average. A breakout projects an initial price target that takes the stock to the $120 area, which is also the 38% Fibonacci retracement level of the 2014 and 2015 range.
The daily chart shows the channel consolidation in detail, the recent successful test of pattern support and the pending retest of pattern resistance. Moving average convergence/divergence is making a bullish crossover, and the relative strength index has crossed above its 21-period average and centerline. These indicators reflect the recent positive price momentum and short-term trend direction. Chaikin money flow is still in negative territory and does not yet reflect recent spikes in volume, but the Chaikin oscillator, which is computed using shorter-term averages, has crossed above its 21-period signal average and is tracking higher.
The stock has moved back above its 50-day average and is re-entering the upper Bollinger band range. It is a long trading candidate at its current level using a percentage stop under the nexus of the average and band center line. Price action around channel resistance will have to be monitored, but generally multiple retests of resistance are eventually rewarded with a breakout.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.