The December retail sales report was a disaster, notes Landon Whaley, who recommends shorting the SP...
Trade Autopsy: Las Vegas Sands (LVS)
12/07/2010 12:01 am EST
Before I break down the various trades that I thought offered good risk/reward on December 2 for LVS, I would like to discuss December 1. Las Vegas Sands (LVS) gapped higher on December 1 with the large gap up in the market. It sold off in the morning and found support at the $51.15 level. The level was tested a second time around 12:30 pm right as I began my morning video. LVS was showing relative weakness to the market, so when we received a question about buying it if it touched support again, I recommended not getting long. I also made a mental note to look at it the next day as a potential short if it traded below the $51.15 level.
On December 2, as the market opened, LVS was directionless for the first 15 minutes. Then at 9:46 am, there was an increase in selling pressure, which caused my price alert to trigger at $51.15. This was the beginning of the fun!
- The first trade opportunity was a short sale based on a breach of the prior day’s support area. My trading style dictates to initiate a small position as soon as the prior day’s support is breached. If the stock continues to hold below the prior day’s support, then I will add to the position. In this instance, LVS did traders the favor of showing them a 70-cent down move on heavy volume so they could have confidence in shorting the retracement to prior support. If you zoom in on the two-minute chart, you can clearly see a large seller with an intermediate sell algorithm dumping LVS all the way down to $49.54. It is clear when the sell program tapers off at 11:30 am as it is forming a triple bottom.
- The second trade which was a long triggered at 11:38 am on a large increase in volume as LVS was clearly breaking out of its downtrend. My trigger buy price was above $49.90, which was the price it failed at after the second test of support. Confirmation of the trade came quickly as there was a surge in volume and it traded above $50.05, which had been the retracement high off the initial low of $49.54. The large surge in volume in conjunction with the disappearance of the methodical seller led me to believe shorting opportunities were probably done for the day. Little did I know that the initial seller in the morning was someone exiting due to advance knowledge of the news from Macau.
- This trade is not one I was interested in making. Yes, LVS did fail to hold above the $51.15 resistance, but the volume on the reversal from $49.50 was so huge that I thought it was more likely to find support on a pullback from $51.25 and then continue higher. But it is clear from viewing the two-minute chart that after LVS pulled back to $50.78, the next significant move was lower and represented a shift in momentum to the downside. Anyone who took this short was in a great position to capitalize on the panic down move that began when the Macau news hit the wires.
- At 12:26 pm, when the volume exploded on the Macau release, LVS was a momentum short below $49.50. Once the momentum slowed and began to reverse in the $48.60’s, it was time to cover half the position. My preference would be to add back the shares covered plus some extra on the drop of the prior intraday low of $48.62. Once the measured move was completed around $47.30, I would take off the majority of the position. Also, there was a crescendo of volume that further confirmed it was a good time to cover the position.
- As LVS began to tighten up after 1:00 pm, a 60-cent range was established between $47.50 and $48.10. After six bars of consolidation on the five-minute chart, LVS breached $48.10, signaling another change in momentum and offering a trade on the long side. You can see that this entry initially failed, dropping LVS all the way to $47.90 prior to beginning its next uptrend. I think of all the trades offered so far, this is the one where some traders would have been stopped out, depending on where they were to place their stops. I think in this instance, an appropriate stop was $47.89 or $47.79. My target for this trade would have been $49.60 based on the morning low. I also would have taken some off at $49.07 as this was the retracement high of the panic low.
- The final trade opportunity was when LVS began trading sideways in the final hour. This is another trade that I wasn’t interested in making, but I could see why others might have been. After failing at $50, some would argue that LVS made a lower high at $49.83 and could possibly reverse again. My feeling was that it rallied almost three points from the low at this point and there clearly was a buyer at $49.35, so I thought it was more likely to touch $50 again. But when the buyer dropped at 3:45 pm, there was a legitimate momentum short opportunity, which ended up offering about 50 cents of profit potential.
Related Articles on STOCKS
Business development companies (BDCs) lend money to private companies in the form of fixed and varia...
In addition to high-quality blue chip, long-term holdings, we also occasionally look to long-term op...
Ingersoll Rand (IR) is a reliably "boring" cash cow; the firm makes its living in HVAC — heati...