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Barron’s has been making the case for beaten-down casino stocks in recent months, and now their charts are adding further evidence to support a bullish bet. With many of their share prices not far from 52-week lows, gaming companies are ripe for gains, and technical indicators suggest the turn has begun.

The Market Vectors Gaming exchange-traded fund (ticker: BJK BJK 1.149739939775527% Market Vectors-Gaming ETF U.S.: NYSE Arca 36.95 0.42 1.149739939775527% /Date(1436821200134-0500)/ Volume (Delayed 15m) : 5659 P/E Ratio N/A Market Cap N/A Dividend Yield 5.098782138024357% Rev. per Employee N/A More quote details and news » BJK in Your Value Your Change Short position ) is now attempting to reverse a 16-month bear market and has already moved above short-term moving averages (see Chart 1). While this ETF is rather thinly traded – making it a risky investment instrument – it is useful for tracking the performance of the global gaming sector. Half of its component stocks trade in the U.S and China and include giants such as Las Vegas Sands ( LVS LVS 4.358132749817651% Las Vegas Sands Corp. U.S.: NYSE ^USD57.23 2.39 4.358132749817651% /Date(1436821233640-0500)/ Volume (Delayed 15m) : 10995136 AFTER HOURS ^USD57.15 -0.08 -0.1397868250917351% Volume (Delayed 15m) : P/E Ratio 17.884375 Market Cap 43797197612.0966 Dividend Yield 4.543071815481391% Rev. per Employee 280105 More quote details and news » LVS in Your Value Your Change Short position ), Wynn Resorts ( WYNN WYNN 3.8402309913378248% Wynn Resorts Ltd. U.S.: Nasdaq ^USD107.89 3.99 3.8402309913378248% /Date(1436821200242-0500)/ Volume (Delayed 15m) : 3483725 AFTER HOURS ^USD108.103 0.213 0.19742330151079804% Volume (Delayed 15m) : P/E Ratio 23.92239467849224 Market Cap 10549694721.2784 Dividend Yield 1.8537399202891833% Rev. per Employee 298350 More quote details and news » WYNN in Your Value Your Change Short position ) and MGM Resorts International ( MGM MGM 3.8567493112947657% MGM Resorts International U.S.: NYSE ^USD18.85 0.7 3.8567493112947657% /Date(1436821333972-0500)/ Volume (Delayed 15m) : 9848957 AFTER HOURS ^USD18.89 0.04 0.21220159151193635% Volume (Delayed 15m) : P/E Ratio N/A Market Cap 10219211943.4197 Dividend Yield N/A Rev. per Employee 157804 More quote details and news » MGM in Your Value Your Change Short position ).

Most big gaming stocks mirror the pattern of the ETF, with bullish divergences between price action and momentum readings such as relative strength index (RSI). Even as price made lower lows, the indicator started to rise, and it is usually price that turns to follow its indicator. Trading is still well below the 200-day moving average, signifying a lingering downside bias, but the average looks to be a good target for a bounce.

To be sure, not all stocks in the sector fit the pattern. Mid-sized stocks such as Boyd Gaming ( BYD BYD 2.808988764044944% Boyd Gaming Corp. U.S.: NYSE ^USD16.47 0.45 2.808988764044944% /Date(1436821584339-0500)/ Volume (Delayed 15m) : 917129 AFTER HOURS ^USD16.46 -0.01 -0.06071645415907711% Volume (Delayed 15m) : P/E Ratio N/A Market Cap 1768063327.49908 Dividend Yield N/A Rev. per Employee 139068 More quote details and news » BYD in Your Value Your Change Short position ) and Penn National Gaming ( PENN PENN 0.9615384615384616% Penn National Gaming Inc. U.S.: Nasdaq ^USD18.9 0.18 0.9615384615384616% /Date(1436821200093-0500)/ Volume (Delayed 15m) : 644155 AFTER HOURS ^USD18.9 % Volume (Delayed 15m) : P/E Ratio N/A Market Cap 1494099371.46629 Dividend Yield N/A Rev. per Employee 156972 More quote details and news » PENN in Your Value Your Change Short position ) have been in rising trends since the middle of last year. These stocks are sector leaders and there is no reason to expect them to stop climbing. But now the larger stocks seem poised to support them, a good sign for the entire group.

One of the largest in the group, Wynn Resorts, now sports an encouraging turnaround story in its chart (see Chart 2). Aside from a clear bullish momentum divergence, it is once again trading above its 50-day average and a bullish crossover among its short-term averages seems imminent.

Specifically, the 10-day simple, 20-day exponentially smoothed and 30-day exponentially smoothed averages are about to flip positions, forming a pattern called a bowtie. This pattern was uncovered by trader Dave Landry several years ago as a sign that the short-term trend is changing. While there have been many close calls during Wynn’s decline, the last time there was a real bowtie signal was when the trend changed from up to down back in March 2014.

The Las Vegas Sands averages are a bit tangled, but unlike Wynn this stock just poked its head above its 200-day average (see Chart 3). This also confirmed a breakout through its own March 2014 trendline. Columnist Jack Hough recommended Sands in February, and last month in the mid-year Roundtable T. Rowe Price Chairman Brian Rogers sang the praises of Sands’ rock-solid balance sheet and 4.8% yield.

A less familiar name whose chart looks promising is Hong Kong-based Melco Crown Entertainment ( MPEL MPEL 4.4825941821649975% Melco Crown Entertainment Ltd. ADS U.S.: Nasdaq ^USD21.91 0.94 4.4825941821649975% /Date(1436821200097-0500)/ Volume (Delayed 15m) : 4420813 AFTER HOURS ^USD22.28 0.37 1.6887266088544044% Volume (Delayed 15m) : P/E Ratio 28.528645833333332 Market Cap 11400165291.3837 Dividend Yield 0.6129986307622091% Rev. per Employee 243208 More quote details and news » MPEL in Your Value Your Change Short position ), which operates casinos exclusively in the Macau region of China.

Trading on the Nasdaq as American Depositary Shares, Melco shows a fairly clear bullish reversal pattern on candlestick charts complemented by bullish momentum (see Chart 4). Between June 26 and 30, it sold off, jumped down to a small range day of indecision and then jumped back up with a strong gain on heavy volume. In Western bar charts, we might call it an island reversal. In candle-lingo it was called a “morning star” pattern and, as its name implies, it represents the dawn of a new day, or rally, in this case.

After a few days of rest, it jumped up again Monday to confirm the positive change in fortune.

Gaming stocks as a group look much better now than they have in a quite some time. Perhaps the potential end of the slide in the Chinese stock market may have boosted these stocks, which are exposed to the Macau marketplace. But whatever the reasons, the technicals are better and worthy of investor attention.

Getting Technical Mailbag: Send your questions on technical analysis to us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . We’ll cover as many as we can, but please remember that we cannot give investment advice.

Michael Kahn, a longtime columnist for Barrons.com, comments on technical analysis at www.twitter.com/mnkahn. A former Chief Technical Analyst for BridgeNews and former director for the Market Technicians Association, Kahn has written three books about technical analysis.

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