MGM Resorts International (MGM) – Closing Trade – November 8th, 2021

Closing Trades

• PDD– 53% Gain: Short Dec 3, 2021 93/104 Call Vertical @ $1.85 Debit

After some consolidation, PDD broke down lower towards the end of last week and managed to break below the $84 minor support level. This move meant that PDD reached our take profit level and with only 25 days to expiration, we take this opportunity to close this trade for a 53% profit. 

Prakash Vijayanath
Analyst at OptionsPlay

 Bullish – MGM – $50.37

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Market Outlook:

Equities ended the week on a positive note with SPY and QQQ reaching new all-time highs and pulling back slightly. For the first time this year, small caps started to show signs of participating in the rally experienced by the large-cap names with the Russell 2000 breaking out of a year-long consolidation range with strong momentum. This is very encouraging for equities and indicates broadening participation. The highlight of last week was the 2 day Fed meeting where equities reacted positively to the announcement on monetary tapering. The key events to watch this week will be further earnings announcements and inflation data which will provide some guidance as to what the Fed will do at their next meeting.

MGM Bullish Trade Idea:
Our bullish trade idea today is MGM Resorts International (MGM). MGM is part of the Consumer Discretionary sector which is the strongest sector currently and is providing leadership for the current equity rally. MGM’s technicals are very encouraging as it has been outperforming the Dow Jones Gambling Index for multiple months. Price has recently broken above its short-term consolidation range and with a strong recovery in Q3 EPS and Revenues, MGM’s technicals and fundamentals are aligning for a move higher. 

As this is a credit spread, look to take profits at 50% gain and cut losses at 100%:

• Take Profit: $0.58 Debit
• Stop Loss: $2.34 Debit

View MGM Trade

Sector Outlook

The Relative Rotation Graph (RRG) for sector rotation indicates that there are 4 sectors in the Improving and Leading categories, and 7 sectors in the Weakening and Lagging categories

Leading (positive relative trend and positive relative momentum): Real Estate, Discretionary, Technology. Discretionary and Technology are showing strong relative strength and momentum while Real Estate is experiencing weakening momentum.

Weakening (positive relative strength and negative relative momentum): Only Materials is in this category and experiencing weak relative strength. Expected to rotate back on the Lagging category. 

Lagging (negative relative trend and negative relative momentum): 6 sectors are now in the Lagging category. Staples is showing an improvement in momentum while Financials, Utilities and Industrials are all showing weak relative strength. 

Improving (negative relative trend and positive relative momentum): Healthcare’s strong momentum is starting to fade in recent days. Should this continue, expect the sector to rotate back into the Lagging category. 

Market Observations

• CVX – Broke above and retested the $111 minor support level multiple times. Momentum is strong and a move back to pre-pandemic levels at $124 is expected. 
• LVS – Rotation back into travel and hospitality stocks in recent days has been strong. LVS broke above the $41 resistance level with strong momentum indicating further upside.  
• LEN – After pulling back to the 21 D EMA, LEN has shown strong momentum and looks set to continue its current bullish trend back to resistance at $109.