Play the Dubai World Overreaction in MGM

11/30/2009 11:02 am EST

Focus: STOCKS

Tim Bourquin

Co-Founder, The Traders Expo and The Futures & Forex Expo

In recent trading, shares of MGM Mirage (MGM) fell 4.09%, or 45 cents, to $10.56 per share after its major real estate partner, Dubai World, asked creditors for a standstill agreement until the default situation is worked out.


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My trading sense in situations like these is that there will be a major overreaction to the downside, but that the gap will likely fill and present an opportunity to grab quick profits.

I would look for the stock to bounce off a resistance area of $8.50, where it has made recent lows. However, a move to the upside—one that makes up a good portion of that overreaction—will likely occur at that point.

By Tim Bourquin, Trading Content Director, MoneyShow.com

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