Casino stocks have performed well since the early February lows, matching the healthy percentage gains posted by the major indices. But unlike most of the overbought market groups I'm looking at right here, the leadership of this feast-or-famine sector shows great upside potential as we head into the second quarter.

This buoyancy makes sense for two reasons. First, spending habits are improving, as we saw in the February retail numbers, and folks may soon return to their old haunts in Las Vegas, Atlantic City and a thousand other gambling venues. Second, the Macau connection has opened an industry growth route that isn't dependent on declining U.S. occupancy rates.

Which brings us straight to Wynn Resorts ( WYNN) and Las Vegas Sands ( LVS), two of the biggest players with heavy Macau exposure. These issues have been on fire in the last two months and are now trading near the levels posted in the middle of 2008. However, despite their vertical trajectories, they could be setting up fresh entries in the next two to four weeks.

Wynn Resorts (WYNN) -- Weekly
eSignal
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Wynn Resorts topped out at $176 in late 2007, after a powerful multiyear rally. It got ripped apart during the bear market, losing over 90% of its value before bottoming out in March 2009. The bounce off that steep low stalled in September, with the stock grinding sideways under resistance in the mid-$70s.

Note how the end of the six-month upswing aligns perfectly with the 38% retracement of the 2007-into-2009 selloff, as well as the broken 2008 lows (red circles). This convergence points to major resistance after a 400% recovery. It also tells us the uptrend might have additional upside once this contested price level gets cleared.

Wynn Resorts (WYNN) -- Daily
eSignal
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The stock lifted into September resistance about two weeks ago, pulled back for a few days and then surged to a multiyear high. The uptick stalled after just one session near $77, with price chopping sideways to higher in a lazy pattern. Volume support has been notably weak, with On Balance Volume failing to confirm the recent breakout.

Wynn Resorts is stuck in an end-of-quarter holding pattern, like many other stocks and sectors. This is delaying a thrust to even higher prices or a buyable pullback to the 50-day moving average, currently near $70. I hope the pullback happens first, because the decline would help the volume pattern and set up supportive conditions for a sustained uptrend.

How far might that rally carry in the next three to six months? Fibonacci levels on the weekly chart, as well as the lows broken in April 2008, point to additional resistance between $95 and $114. With this in mind, "round number" $100 looks like a reasonable reward target by the end of the long, hot summer.

Las Vegas Sands (LVS) -- Weekly
eSignal
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Las Vegas Sands hit triple-digit highs and topped out in 2007, at around the same time as its Macau competitor. However, this stock got beaten up more severely in the bear market, dropping to $1.38 and raising bankruptcy chatter, before embarking on a modest recovery that topped out near $21 in September of last year.

While that's a high-percentage move, the decline did extensive technical damage, with price now stuck more than 30 points under the 38% retracement of the 2007-into-2009 selloff. In other words, it needs to gain all those points just to play catch-up with Wynn Resorts' current recovery. The good news is, there's little resistance from today's closing price, all the way into the mid-$30s.

Las Vegas Sands (LVS) -- Daily
eSignal
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Las Vegas Sands' daily chart looks nearly identical to Wynn's, with the September recovery high, subsequent pullback and recent thrust above resistance. However, the short-term volume pattern is more bullish, because On Balance Volume is making a series of new highs, unlike Wynn. This lends greater support to the current breakout attempt.

Realistically, though, both stocks should move in lockstep, because they're equally dependent on evolving Chinese regulations that affect their Macau operations. So, as with Wynn Resorts, I favor a Las Vegas Sands pullback from the current high, with the 50-day moving average at $18.50 offering a great entry point, ahead of a high percentage rally into the $30s.

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

At the time of publication, Farley had no positions in stocks mentioned, although holdings can change at any time.

Alan Farley is a private trader and publisher of Hard Right Edge, a comprehensive resource for trader education, technical analysis, and short-term trading techniques. He is also the author of The Daily Swing Trade, a premium product from TheStreet.com that outlines his charts and analysis. Farley has also been featured in Barron's, SmartMoney, Tech Week, Active Trader, MoneyCentral, Technical Investor, Bridge Trader and Online Investor. He has written two books: The Master Swing Trader and The Master Swing Trader Toolkit: The Market Survival Guide, due out in April. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

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