Friday, July 23, 2010

MGM Watch

The entertainment company MGM Resorts International (MGM) has moved to bull phase on Person's Proprietary Signal (pps) after a 5-day bearside whipsaw.
MGM $10.55

Earnings will be announced Aug. 3 before the markets open.

The phase switch brings the pps into line with the parabolic sar and the macd, both in bull phase since July 13. Moreover, the fast stochastic today broke above the 80-line, strengthing it's bullishness.

The signal comes as the price rises to more than 3% above Thursday's close. Volume, however, is running below Thursday's, as Thursday's was less than Wednesday's. A downward stairstep in volume does little to inspire confidence that a bull signal will be profitable.

The preceding bear phase on the pps produced a price rise of $1.50, so the signal was a failure. Prior to that was a three-day bullish phase that produced a 50¢ decline in price. Signal failure of this type is a sign of a balance between buyers and sellers, a stock that's going nowhere except for a stroll down Whipsaw Alley.

MGM has been on a slide since last April, losing 45% of its volume. Since July opened the stock has been trading sideways. To break out of the current range would require a rise above $12.75, and even better above $16.66.

Both are a stretch from the current price, and so I see MGM as being either a range-bound options play -- an iron condor, for example -- or as an earnings surprise play. The company has shown a loss for the past five quarters. A return to profitability, or at least a significant reduction in losses, would cause a price rise of considerable magnitude.

Person's Table
ppspps openupper pivotlower pivot
MGM $10.55 $10.22 jul23 $11.79 $7.44

The stock has been trucking along just below the midline since early July. The last time it traded entirely above the midline was in early May. It's a bearish profile on the Person's chart.

Reversal Levels
  • $16.66, +57.9%
  • $12.75, +20.9%
  • $10.55 <== You are here.
  • $9.28, -12.0%

The Great Reflation: How Investors Can Profit From the New World of Money
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Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.

  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

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