China's Casino Crackdown

Sep 19, 2021 | Are Las Vegas casinos a hidden-gem for Swing Traders?

Weekly Newsletter- Week of 9.19.2021 

Is China Targeting Vegas Next? 

The threat of Chinese regulation once again had rippling effects on the stock market. This week the Casino industry had a massive pullback with some of the biggest stocks in the sector dropping over 10%. On Wednesday, Macao, a special region in China noted they would be undergoing a 45-day review session on the gambling industry. 

Big Revenue Generator 

Macau, the only region under Chinese jurisdiction where casinos are allowed to operate, has historically been extremely lucrative for the region. Its 41 casinos generated over 6x what Las Vegas did last year. For context, Vegas has 144 casinos. Macau has always been considered a go-to destination for high rolling millionaires within the region- casinos generated over $360 billion in earnings during 2019. 

Weekly Swing Trades

PNRG (Prime Energy)

October 2, 2022

Entry Price:

80.62

Stop Price:

76.85

Target Price:

88.04

Time Frame:

1 Week Hold

Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.

DV (Doubleverify)

October 2, 2022

Entry Price:

27.75

Stop Price:

26.75

Target Price:

29.00

Time Frame:

3 Week Hold

Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.

U.S. Stocks Crash 

U.S. stocks that operate in Macao crashed in response to the news as investors are concerned this review will almost certainly lead to enhanced government scrutiny and regulation. Wynn Resorts plunged nearly 20% in 5 days, making it the worst run for the stock in over a year. Additionally, Las Vegas Sands dropped another 9%. Each of these stocks generates about half of their overall from Macau. Combined, Wynn and Las Vegas Sands lost close to $5B in market cap this week alone. As these stocks saw their share price drop, industry analysts began to slash price targets, sending the stock down even further. Investors in these stocks are once again forced to ask, “How far will Chinese regulations go this time”? 

Increased Regulation 

The increased scrutiny in the casino industry comes at a difficult time for the sector. Casinos have been especially susceptible to any pandemic-related news, given their operating model. Many of the most prominent casinos were just beginning to get back to pre-pandemic levels for both foot traffic and revenue. The threat of increased regulation could be a major setback for the industry. Some analysts believe the selloff may be overdone. The consensus seems to be that Macau needs these casinos for the revenue, the tourism, and the jobs they create. Again, concerns arise over how the Chinese government may impact the entire industry. 

Space Race Ignites 

We’ve previously reported extensively on space tourism in our 07/04/21 Newsletter. This week, another milestone was achieved as four people returned to Earth from a three-day excursion aboard the SpaceX Dragon capsule. Currently, Virgin Galactic remains the only major publicly traded company in the space tourism industry. Though, SpaceX and Blue Origin continue to make advancements! This week marked the first-ever fight to Earth's orbit, flown completed by tourists or non-astronauts. After traveling more than 17,000 miles per hour, the spacecraft's exterior reached temperatures of 3,500 degrees Fahrenheit. Though this wasn’t the first mission flown by tourists, this trip was notable because it did not involve a stay at the International Space Station under the guidance of professional astronauts. The crew was responsible for researching how their bodies would react to space, though many specifics about their trip have yet to be revealed. The space tourism industry is just beginning to blast off and any updates are sure to send ripples throughout the sector. 

SEC Struggling to Regulate Crypto 

Coinbase CEO Brian Armstrong recently tweeted out his plans to launch a crypto lending product, known as Coinbase Lend, sometime later this year. Their proposed lending product is lower than other crypto lending businesses, according to Armstrong. The SEC was quick to jump in and label the product as its own security, which led to a fierce Twitter rant from Brian Armstrong. This is another example of a leader in the crypto space, publicly stating their frustrations over the SEC and their desire to regulate crypto. The SEC recently went after the popular DeFi app SOFI, for similar reasons. Crypto investors have long complained that the SEC has not been clear or proactive about their intended guidance. The current approach seems to lack focus and clarify as the cryptocurrency space continues to expand. Concerns continue to arise that “a lack of clarity, coupled with the SEC’s insistence at bringing these assets into an ill-fitting securities regulation framework, which may risk hampering innovations at the expense of investor protection.” We all know crypto regulation is coming, but it may be a while before the SEC can roll out a framework that makes sense. 

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Weekly Watchlists

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Weekly Review

Market Performance- Week of 09.25.2022

Recent Winners

SBUX (Starbucks)

SBUX (Starbucks)

Entry Price:

85.00

September 11, 2022

Price at High:

89.90

Return for Members:

5.76%

Timeline:

2 Month Hold

Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.

PNRG (Prime Energy Resources)

PNRG (Prime Energy Resources)

Entry Price:

83.20

September 4, 2022

Price at High:

100.00

Return for Members:

20.19%

Timeline:

3 Week Hold

PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.

PYPL (Paypal)

PYPL (Paypal)

Entry Price:

87.00

August 28, 2022

Price at High:

103.00

Return for Members:

18.39%

Timeline:

4 Week Hold

Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.

Recent Watchlist Winners

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