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MGM Mirage - MGG - close: 70.25 chg: -2.51 stop: 72.51

Company Description:
MGM MIRAGE, headquartered in Las Vegas, Nevada, is one of the world's leading and most respected hotel and gaming companies. The Company owns and operates 11 casino resorts located in Nevada, Mississippi and Michigan, and has investments in three other casino resorts in Nevada, New Jersey and the United Kingdom. (source: company website)

Why We Like It:
After an incredible run from August 2004 through early February 2005 it finally looks like MGG is going to see a correction. The stock has effectively been churning sideways for the last couple of months between $70 and $80 but now shares are starting to breakdown and volume was more than double the norm on today's test of support in the $69.00-70.00 level (and its 100-dma). We suspect that with the broader market showing weakness MGG could be a big target for profit taking. Yet part of the challenge is that both the major averages and MGG are at support. If the market bounces then we'd expect MGG to bounce too. Before initiating any bearish positions in MGG be sure to confirm market direction. Due to the major averages being at support we're going to use a TRIGGER to open the play in MGG. Our entry point will be $68.75. This would put MGG below today's low and the January low. The P&F chart is already bearish with a sell signal pointing to a $60 target. We want to target the top of the early December gap near $62.00 so our target will be $62.00-62.50. We cannot find a firm earnings date for MGG but the data we have suggests MGG will report in very late April or early May. Once MGG does establish a Q2 earnings date we'll plan to exit before the company reports.

Suggested Options:
We are suggesting the May puts although the June strikes have much more open interest.

BUY PUT MAY 70.00 MGG-QN OI= 81 current ask $3.70
BUY PUT MAY 65.00 MGG-QM OI= 0 current ask $1.60

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: 0.00
Earnings Date 05/01/05 (unconfirmed)
Average Daily Volume = 997 thousand
 

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