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Dave & Donald Moenning

Mr. David Moenning is a full-time professional money manager and is the President and Chief Investment Officer for his Chicago-based Registered Investment Advisory firm, Heritage Capital Management (...

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Product Performance

Why You Should Have Bet Against the House By Shorting Caesars Entertainment


Caesars Entertainment (NASDAQ: CZR) presents a solid short opportunity Friday morning. The stock recently fell roughly 23 percent from Monday's close to Tuesday's intraday lows on an announcement that the company was issuing $1 billion of first lien bonds at an eight percent yield, on top of $1.15 of second lien bonds at an 11 percent yield.

Wall St. doesn't like companies raising money, and though CZR was able to recover intraday losses on Tuesday, the damage was still done by the big gap down.

The stock tried to recover through the week, and posted an encouraging session on Wednesday. However, Thursday came and went with a lackluster session for CZR, and now on Friday it is becoming clear that the stock is going to break down.

On top of CZR's recent price action misfortune, it doesn't help that the Casinos & Gaming stock is up +190.31% YTD as of yesterday's close, which is absurd.

CZR is currently sitting at its only short-term support, right around $19.50. Should the stock break down below this level (which it is currently doing as I type this report), the next stop given its current downward trajectory is intermediate-term support south of $18.

Given investors' reaction to the issuance of bonds, horrible short-term price action, a ludicrous YTD  percent gain, and a technical picture that is breaking down, CZR is a good short play at current prices back down to the $17.50 area.

Should the stock make an unlikely turn-around today and close above $20.88, it would be a good idea to cover. Otherwise, CZR was a compelling short Friday morning.

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When to Consider Entering the Trade:
Short at the current price (~$19.53).

When to Consider Exiting the Trade:
At a close above $20.88 (Cover) / A close below $17.50 (Profit-Taking)

Disclosure: At the time of publication the editor and affiliated companies own the following positions: None

Caesars Entertainment Corp - Last 30 Days
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Caesars Entertainment Corp - Last 3 Months
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Caesars Entertainment Corp - Last 6 Months
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Tags: casino

Posted in: Education Short Ideas Technicals Trading Ideas General