It's Time to Bet Big on a Casino Comeback

Don’t gamble. The stock market’s not a casino.

How many times have you heard that?

If you find yourself constantly dealing with knee-jerk, mistimed and unprofitable trades, you need to change your approach.

To become a consistently winning trader you must eliminate the gambler’s mentality from your trading routine. A successful trader doesn’t guess. He waits for his setup, assesses the possible outcomes and trades with a plan.

But what if a long-shot gamble pops up on your radar? And what if it makes for a perfect trade?

Don’t worry, I’m not hinting at a huge, all-or-nothing trade here. We’re going to let someone else make a long-shot bet instead— while we play the odds for double-digit gains.

The best part is you don’t have to go to Las Vegas to place your bet. The house always wins—so we’re going to bet on it!

I’m talking about casinos. Casinos make millions from gamblers. But casino stocks over the past couple of years have been losing bets for investors. The VanEck Vectors Gaming ETF (NYSE:BJK) peaked in early 2014. Then it crapped out for two straight years, robbing investors’ chips for a solid 24 months.

But it finally looks like these stocks are reversing their fortunes…

BetonBlack-DR

Casino stocks have rocketed off the Brexit bottom and are now outpacing the major averages. The sector is now up nearly 12% year-to-date.

But it hasn’t been a smooth ride…

After hitting rock bottom in January, it looked like gaming stocks were coming up snake eyes once again. But the gambling gods had other plans. A March rally launched these stocks above a powerful resistance level that held them down for two years. That downtrend looked busted. But a spring swoon dropped these stocks back into the red for the year.

Now we have a second chance to play a casino rally. Time for a snapback trade!

As share prices recover, we’re also enjoying a tailwind from improving conditions in Macau. Macau is the Las Vegas of China. All of the major international gaming brands are heavily invested in Macau. Gambling revenue there has been stagnant. But that’s about to change.

A Wells Fargo analyst estimates total Macau gaming revenue for August will be flat to down 2% year-over-year.

“That’s better than the consensus of analysts who cover Macau casinos and have called for a 3%-4% drop. By comparison Macau revenue fell 48.6% in February 2015 vs. a year earlier, amid crackdowns on money laundering and smoking,” Investors Business Daily reports.

If Macau does hit the upper end of this forecast, IBD says it will be “the first month since May 2014 that Macau’s gambling revenue hasn’t shrunk on a year-over-year basis.”

The charts show that casino stocks have bottomed out. Now it’s time for them to soar.

Sincerely,

Greg Guenthner
for The Daily Reckoning

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