Mgm grand casino Mgm casino hotel Mgm casino detroit Mgm casino jobs Mgm hotel and casino Mgm casino las vegas Mgm detroit casino Mgm grand hotel and casino Mgm grand casino detroit Mgm grand hotel & casino Mgm casino locations Mgm macau casino Mgm casino. MGM Resorts Stock Set to Punish Short Sellers, Investopedia

MGM Resorts International ( MGM ) shares sold off following the Oct. 1 Las Vegas tragedy, dropping to a six-month low in the upper teens, but the stock bounced strongly into November. It is now consolidating near the top of a seven-month trading range and could break out soon, punishing event-focused short sellers while rewarding shareholders who held on tightly despite the horrendous news flow. Mgm casino.

The company owns Mandalay Bay Resort and Casino, the site of the massacre, as well as half the hotel rooms on the Las Vegas Strip. This massive exposure will generate the greatest legal and tourism losses in the aftermath of the catastrophe, calling into question the wisdom of owning the stock into 2018. Even so, long-term damage to the city's free-wheeling reputation is unlikely, as evidenced by other cities dealing with terrorism and lone gunmen since the turn of the century. (For more, see: Top 5 Ways Terrorism Impacts the Economy.)

A 1992 uptrend stalled at a split-adjusted $12.44 in 1993, giving way to more than five years of sideways action followed by a 1999 breakout that ended near $20 one year later. The stock hovered near that price level throughout the 2000 to 2002 bear market and turned higher in 2004, posting healthy gains during the mid-decade bull market before topping out at an all-time high just above $100 in October 2007.

The stock plunged during the 2008 economic collapse, weighed down by an ill-timed debt load that nearly bankrupted the company. The decline settled at a 20-year low in the single digits in March 2009, while the subsequent bounce stalled in the mid-teens in 2010. That level marked steep resistance into a 2013 breakout and uptrend that topped out in the upper $20s in the first quarter of 2014. It then rolled into a volatile correction that tested two-year lows before finding strong support at the 2013 breakout in February 2016.

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The subsequent recovery wave reached 2014 resistance following the November 2016 election and consolidated at that level into a May 2017 breakout that failed to gather strong buying interest. The uptick reversed at $34.34 in June, carving range resistance that is now getting tested for the third time. Range support near $30 has held firm through this period, despite a quick October washout that trapped overaggressive short sellers.

The monthly stochastics oscillator crossed into a long-term sell cycle in the third quarter of 2017, predicting relative weakness that could last into year end. The stock has acted better than this bearish signal might dictate, correcting through price rather than time within the trading range. This bodes well for a breakout when the indicator flips into a new buy cycle, perhaps as early as January 2018. (See also: MGM Downgrade Could Unnerve Shareholders.)

The three-year daily pattern into the fourth quarter of 2016 completed a cup and handle, while the May 2017 breakout has generated a measured move reward target in the low $40s. The first rally wave has generated little or no momentum, but a buying spike above $35 is likely to attract broad interest that lifts the stock quickly above $40. A positive feedback loop may then unfold, making the stock a top sector performer in the first half of 2018.

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On-balance volume (OBV) topped out in 2014 and entered a distribution wave that ended in the first quarter of 2016. Accumulation matched price action into the fourth quarter of 2016 while also tracking the 2017 breakout to new highs. Selling pressure since July has dropped the indicator through new support, generating a bearish divergence that should end with a rally above $35. (To learn more, see: Uncover Market Sentiment With On-Balance Volume.)

The Bottom Line

MGM Resorts is holding within a seven-month rectangular trading range despite the October shooting tragedy and could rally to new highs after it works off a long-term sell cycle. Traders should watch volume closely during that uptick because momentum could escalate rapidly once OBV clears the 2014 high. (For additional reading, check out: A Future Shift in the Las Vegas Casino Industry.)

<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>

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