BY BILL GRIFFO
November 25, 2023
Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.
Have a stock YOU want us to review? Email my team here. – Mark
Hey Traders,
Melco Resorts & Entertainment Limited (Ticker: MLCO)
Melco was recently awarded a 10-year gaming concession by the Chinese government in Macau. It’s one of only six companies to be awarded this privilege.
With China now providing aggressive stimulus for the economy there is a nice tailwind at the back of the gaming industry and MLCO is well positioned to benefit.
Today, we’ll dive into the charting pattern and option positioning data to find the right trade …
MLCO Chart Pattern
A Few Things to Like Here :
- The last low completed a positive reversal pattern (black arrow0
- Since then the moving average convergence divergence (MACD) completed a positive crossover, which confirms the bullish trend.
- Finally, the price is holding above the high volume price control point at $7.20.
Option Positioning
Option positioning analysis shows you where investors are making their bets on MLCO … As you can see below almost all bets are laid on $7, which is funny since in craps that is the only number you don’t want to see.
This makes your decision easy because the largest strike provides a wall of support and above that is only call gamma so putting on a trade here limits your risk to a close below 6.75 …
However, if MLCO builds momentum to the upside the first target is $9 and beyond that would be $11.25.
China is certainly adding a lot of liquidity into the economy and US policy is shifting that way so gaming stocks can do well in the months ahead…
You can own the stock outright at this level or buy a $10 call to April and just sit with it … Check out the seasonal pattern going back 16 years .. The seasonal pattern shows the potential for a 20% rise in the stock into April ‘24 …
Thumbs up on MLCO and I will be laying a bet down next week for sure … If you would like to receive exclusive alerts on all Power Income Trades please call the Option Pit customer care team and hear about our special holiday deals 888-872-3301 …
Live and Trade With Passion My Friends,
Griff
Bill Griffo
Head Income Trader
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