MACD: How to Turn a “Gamble” Into a Sure Thing
As some of you might know, I love Las Vegas.
So you can imagine my excitement when our publisher decided to host Investing Daily’s annual Investing Summit in Vegas this year. We kicked things off yesterday and finish up later today.
Since we’re in Vegas today, I thought I’d look back at a memorable trade involving a company right down the street: Wynn Resorts.
I’ve always been very attracted to casinos as an investor. First off, I love to gamble myself. I especially love to play craps, where the mathematical odds are very favorable for the player. But that’s not the only thing driving my interest.
I also like their business model. As you probably know, casinos have mathematically precise odds that position them for consistent profitability. That’s why I’ve followed Wynn Resorts closely.
Here’s how this trade developed.
It started after I read an article in The Economist that talked about Macau, an island off of Mainland China.
Macau was building bridges to the mainland and to Hong Kong airport, meaning that a much larger number of people would soon be going to Macau to gamble. The sheer numbers of people gaining access to the island would provide tremendous new profit potential for the casinos in Macau. It was poised to be a big boost for Wynn Resorts too.
You see, Wynn already had a casino in Macau, but was now building a second casino because it wanted to expand beyond its heavily high-roller customer base, the very rich people who went there to gamble.
High-rollers are profitable, but they’re a relatively small group of people. So even if you get them to gamble with you, there’s a limited volume of players. Plus, a lot of the high-rollers require a lot of perks, so the profit margins on them can be pretty low.
With an influx of new business coming their way from the second casino, I was very anxious to get back into the stock. But I didn’t want to just get into the stock willy-nilly. Instead, I waited for something called a MACD trigger.
MACD stands for Moving Average Convergence Divergence. It’s one of the most powerful triggers I use inside my Velocity Trader service, where I structure specialized trades that capitalize on predictable short -term price movements.
MACD works by measuring the moving average of a stock price.
I like to look at both an 8-day “fast moving average” and a slower 17-day moving average. In particular, I’m looking for the 8-day moving average to cross above the slower 17-day moving average.
With MACD, what we’re trying to do is get in at the ground level right when a stock is changing from stagnation to a strong upward move. That’s what MACD helps us uncover.
For Wynn resorts, that trigger came in late October, not long after the article I read was published. In this case, Wynn Resorts stock made a strong up move, and the trade I set up ended with a total return of 140% when I closed it out a few months later.
Again, the beauty of MACD is that it doesn’t wait for a move to have already established itself. It allows you to “get in on the ground floor” right when a strong up move is happening.
Now, this is just one of many great examples of how MACD can generate big wins in a predictable way. The truth is this indicator is useful across almost any publicly traded company, you just have to know what to look for.
I’m following a number of stocks right now with indicators that look a lot like Wynn’s back then. I’ll be releasing trade instructions in the next few days, and I’d love for you to take part.
But there’s a small catch. You see, these instructions only go out to Velocity Trader members on Tuesday morning. So if you’re not already a member, you won’t see them.
That’s why we’ve opened up access to 100 new members for a limited time. You can learn more about Velocity Trader by clicking here.
When you do, you’ll get the behind-the-scenes details on some other top trades I’ve made over the years. You’ll also hear from some of my loyal followers. But most importantly, you’ll get access to one of the most amazing offers my publishing company has ever made. I look forward to seeing you “on the inside.”