How to play a comeback in casino stocks: Trader

It's been a winning year for shares of Wynn Resorts.

Casino stocks have suffered severely in the past year, as the Chinese government's crackdown on corruption has driven revenue in Macau to multiyear lows. But some investors may be anticipating a turnaround for Wynn's stock, after the company reported better-than-expected fourth-quarter earnings, and Macau saw its best monthly revenue growth in 20 months.

"This stock has come back from the brink of a pretty serious collapse," Todd Gordon of TradingAnalysis.com said Wednesday on CNBC's "Trading Nation." From looking at the chart of Wynn's stock, Gordon said it may be starting a new uptrend.

Wynn shares have risen 37 percent in the past month. Casino competitor Las Vegas Sands has also risen 20 percent in one month.

Read More Trading casino stocks on Macau numbers

Gordon said shares of the casino giant have seen a "double bottom," as well as a break above resistance — signaling to him that the stock will add to its gains. However, he recommended waiting for a pullback to previous resistance at $78 before making a bullish bet on the casino stock.

"If the stock were to break back in the [previous] range, I would say the premise of the trade is incorrect and we want to step to the sidelines," Gordon said.

Wynn's stock rose slightly on Wednesday to $85. For his trade, Gordon is targeting a move back up to $100 per share, by buying the April 85-strike call and selling the April 90-strike call for $1.50 per share (with 100 shares per contract). The strategy is known as a bullish call spread, and is profitable if Wynn shares rise above $86.50 by April expiration. If shares rise above $90, Gordon will make a capped profit of $3.50 per share.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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