Recent government anti-corruption and anti-smoking initiatives have caused gambling revenues in Macau to drop by around $500 million to $3.2 billion in September, the fourth monthly decline in a row for the territory.
While these initiatives were expected, the pro-democracy protests in Hong Kong, which is just a quick ferry ride away, were not. Some traders believe that too is hurting gaming activity.
"People have been expecting a crackdown on corruption," said Gina Sanchez, founder of Chantico Global and a CNBC contributor. "But this trouble in Hong Kong, this is new, and this is not priced in and I think that's probably going to add a new layer of hurt to a stock that is already hurting."
The technicals show that shares of Wynn Resorts—one of the biggest casinos in Macau—could see more short-term pain, at least according to the chart work done by Richard Ross, global technical strategist at Auerbach Grayson.
On a one-year chart, Ross sees Wynn's stock as having formed a bearish "head and shoulders" pattern starting a year ago. This summer, it broke below the neckline of the formation as well as its 200-day moving average and its short-term supporting trend line.
"That's really bad here in the short term," said Ross, a "Talking Numbers" contributor. Yet he sees some positives in the stock's five-year chart and sees it as transitioning from a growth play to a value play.
"It's still a pretty bullish longer-term chart," Ross asserts. He sees the stock as having formed a base of support from 2010 to 2013. It broke above the neckline of that base at $165 per share early last year.
"If you like this stock, you can buy it in here and use that $165 level as a protective stop," recommends Ross, but with a very big caveat. "Our analysts don't like it. They downgraded this sector."
"The low-end of the [gaming] market has held steady but as we know, that's not where the profits are," explained Ross. "That might be were the traffic is but that's not where the big money is made. It's all about the whales and the VIPs, and they're taking a much lower profile with these anti-corruption measures."
To see the full discussion on Wynn, with Sanchez on the fundamentals and Ross on the technicals, watch the above video.