Talking Numbers - CNBC | Yahoo Finance

Sponsored by
Talking Numbers

Why it may be time to fold on casinos

Talking Numbers

Casino stocks have been on a winning streak. But it might be time to fold them.

Stocks such as MGM Resorts and Las Vegas Sands have gained roughly 2 percent this week alone while Wynn, despite losing 4.3 percent on Wednesday, is still up 1 percent in the last five trading days thanks to its Tuesday rally. Traders say the catalyst has been more positive news out of Macau, the world's gaming mecca.

(Read: Money talks: Less gambling, more clubbing in Vegas)

But according to Steve Cortes, founder of Veracruz TJM, the good news coming out of China will likely be short-lived.

"It's all about Singapore [and] Macau," Cortes said. "And, that's my problem. I'm actually short emerging markets right now. I'm short the EEM" (the iShares MSCI Emerging Markets Index ETF).

Cortes pointed to HSBC's China purchasing managers index staying below 50 for the fourth month in a row. A number below 50 indicates manufacturing in China is in contraction.

"There are all kinds of credit risks in China," he said. "So, because I am too bearish on China and Asia to believe in these stocks here, I think if anything, you want to use this lift to take profits or even consider shorting names like LVS" (Las Vegas Sands).

“Talking Numbers” contributor Richard Ross, global technical strategist at Auerbach Grayson, said the charts agreed with Cortes that Las Vegas Sands is a “sell.”

"We see the classic trappings of a stock within the throes of a reversal in trend," said Ross about Las Vegas Sands' one-year chart. In particular, Ross is concerned with a head and shoulders pattern that he sees starting in November. Ross placed the pattern's neckline at roughly $71 per share.

"That's the key that unlocks the entire pattern," he said. "I think we get a break below that key level of support."

(Read: Casino riches fuel Macau property 'bubble' forcing residents elsewhere)

Ross also said there's the potential for a $20 to $25 downside in Las Vegas Sands' stock ahead. After the stock broke out of what he sees as a multiyear sideways trend channel last year, Ross expects Las Vegas Sands to eventually revert at least to the upper end of that that trend channel at around $60 per share once it breaks through the short-term neckline of $70.

"I think that's a likely downside for the stock," said Ross. "I would be a seller here. I would add to that short position on a break below the neckline at around $70," Ross added. "The technicals are bearish, just as are the fundamentals."

To see the full discussion on Las Vegas Sands, with Cortes on the fundamentals and Ross on the technicals, watch the video above.

[Disclosures: Steve Cortes is short the EEM.]


View Comments (51)

Recommended for You

  • China's rich pimp their planes as jet market takes off

    Shanghai (AFP) - When a Chinese customer asked for the interior of his new Bombardier Challenger 850 jet to be covered with pricey black carbon fibre, the designer was shocked -- but happy to oblige.

  • Obama admin. says health subsidies will continue

    WASHINGTON (AP) — A federal appeals court delivered a potentially serious setback to President Barack Obama's health care law Tuesday, imperiling billions of dollars in subsidies for many low- and middle-income people who bought policies.

    Associated Press
  • What a Marijuana ETF Would Look Like

    The changes taking place around marijuana for medical use and for recreational use are the biggest in almost everyone’s lifetime. There are quite literally billions of dollars up for grabs for those who ...

    24/7 Wall St.
  • CEO: Rivers to quit Clippers if Sterling stays

    LOS ANGELES (AP) — The interim CEO of the Los Angeles Clippers testified Tuesday that coach Doc Rivers told him he will quit if Donald Sterling remains the owner of the team.

    Associated Press
  • We Paid Off $90K of Debt in 4 Years

    One couple went into debt to give their son the education that he needed, eventually owing nearly $90K on credit cards. Here's how they paid it off.
  • Play

    How to Build Your Own Annuity

    Instead of paying an insurance company, financial advisor Allan Roth recommends building your own "indexed annuity" that protects principal while giving market upside.

    WSJ Live
  • U.S. housing turning the corner, inflation creeping up

    By Lucia Mutikani WASHINGTON (Reuters) - U.S. home resales hit an eight month-high in June, suggesting the housing market was gradually regaining momentum and would help the economy to stay on a higher growth path this year. The third straight month of home sales gains, reported by the National…

  • Airlines ban flights to Israel after rocket strike

    JERUSALEM (AP) — A Hamas rocket exploded Tuesday near Israel's main airport, prompting a ban on flights from the U.S. and many from Europe and Canada as aviation authorities responded to the shock of seeing a civilian jetliner shot down over Ukraine.

    Associated Press
  • Herbalife Plummets

    Herbalife shares were down as much as 11%...

    Business Insider
  • Goldman Sachs: Here Are 25 Small-Cap Stocks to Buy

    While Goldman Sachs is cautious on small-cap stocks due to valuation concerns, the firm still finds some pockets of opportunity among individual names within the group.

    The Wall Street Journal
  • China food scandal spreads, drags in Starbucks, Burger King and McNuggets in Japan

    By Adam Jourdan SHANGHAI (Reuters) - The latest food scandal in China is spreading fast, dragging in U.S. coffee chain Starbucks, Burger King Worldwide Inc and others, as well as McDonald's products as far away as Japan. McDonald's Corp and KFC's parent Yum Brands Inc apologized to Chinese…

  • New India government urges changes to World Bank

    India's new government has called for reforms to the World Bank structure to reflect the "emerging" clout of developing nations in a meeting with visiting bank chief Jim Yong Kim. The government, which took office in May, said in a statement late Tuesday that Finance Minister Arun Jaitley stressed…

  • Detroit retirees back pension cuts by a landslide

    DETROIT (AP) — A year after filing for bankruptcy, Detroit is building momentum to get out, especially after workers and retirees voted in favor of major pension changes just a few weeks before a judge holds a crucial trial that could end the largest public filing in U.S. history.

    Associated Press
  • Beef pollutes more than pork, poultry, study says

    WASHINGTON (AP) — Raising beef for the American dinner table does far more damage to the environment than producing pork, poultry, eggs or dairy, a new study says.

    Associated Press
  • JetBlue pilot among 6 arrested in Boston drug bust

    BOSTON (AP) — A JetBlue pilot from Florida is among six people arrested by Boston police over the weekend in an investigation of drug dealing incidents near the Boston Common.

    Associated Press
  • Rebels release train with bodies from downed jet

    HRABOVE, Ukraine (AP) — Bowing to international pressure, pro-Moscow separatists released a train packed with bodies and handed over the black boxes from the downed Malaysia Airlines plane, four days after it plunged into rebel-held eastern Ukraine.

    Associated Press
  • Play

    U.S. Stocks Open Lower

    U.S. stocks kicked off the week in a decline, as investors paused following last week's run to record highs. MarketWatch's Victor Reklaitis joins Paul Vigna on the News Hub with the details, plus which stocks to keep an eye on. Photo: Getty

    WSJ Live
  • Top Analyst Upgrades and Downgrades: Apple, ARM, DaVita, GE, GoPro, Itron and Many More

    These are the top analyst upgrades, downgrades and initiations from Wall Street firms on Monday, July 21, 2014. They include Apple, ARM Holdings, DaVita Healthcare, General Electric, GoPro and Itron.

    24/7 Wall St.
  • Microsoft CEO, Seeking Growth, Tells Managers to Step It Up

    The day Satya Nadella became Microsoft Corp.'s chief executive officer, he invited several dozen vice presidents to breakfast and had a simple, calm admonition for them: "Can you step it up?" The engineer's tone was a departure from the yelling and wild gesticulations favored by his salesman…

  • 6 Money Lessons You Should Have Learned Before College

    In a matter of weeks, the class of 2018 will be...

    Business Insider