9:00am (EST)

I spent much of yesterday just catching up on news that I missed and getting a feel for the market. The casino stocks look like their hair has caught fire (again) and we played these names back in the beginning of April for about a week. We made triple-digit profits on a few plays and it looks like we took profits early in the May call options, but like I said, these stocks just started rallying last Friday.

Las Vegas Sands (LVS, $11.34, up $1.84) was up 20% on Tuesday and has surged from $7.82 in three trading days. The May 10 calls (LJJEB, $2.10, up $1.30) were up 160% after opening at $1.40 yesterday. The strength was strong from the opening bell and if you surfed the wave again, good for you. On April 3rd, the May 5 calls (LJJEA, $6.40, up $1.95) were going for 65 cents and my famous last words were…”They could be a bargain if LVS is headed back above $5″. That looks like a “10-bagger” as Wall Street would put it.

Wynn Resorts (WYNN, $49.98, up $7.17) added 17% and the May 45 calls (UWYEI, $6.30, up $4.05) zoomed 180%. Unbelievable. And my other favorite casino stock, MGM Mirage (MGM, $12.80, $3.36) jumped 35%. The May 12.50 calls (MGMEV, $1.44, up $1.16) gained an astounding 400% after opening at 45 cents. Holy Smoke!

So why the rally? After all, two of the three companies just reported earnings that were worse than what Wall Street had forecast. Las Vegas Sands beat expectations. Still, you can put lipstock on a pig and it is still a pig. Things are still “brutal” as one of the CEO put it.

Wynn’s option chains are pretty expensive so lets see if we can get our feet wet with MGM and Las Vegas Sands. The MGM June 15 calls (MGMFC, $1.35, up $1.00) and the LVS June 15 calls (LVSFZ, $1.05, up $0.69) had huge moves yesterday so obviously we won’t be throwing down the rent money on these plays today. However, we can add them to our Watch List and see where they are next week. I would like to see both stocks fall back below $10 before even thinking of a position but that might be asking too much. If we get the pullback, we will have to check the chart to see where we are at. Bottom Line. Wait for a pullback.

On that note, I always use charts for most everything when looking at trades and this art alone will help you immensensly in your options trading. As many of you know, I’m working on an option trading manual but the stock part of the course is ready and it teaches you the technical trading that you will need to become a better options trader. The course is available by going here and you get lifetime mentoring. Folks, you can’t beat that with a stick.

The directional stock moves that occur in the market today are contained within this comprehensive manual and is the key to learning chart work. After all, a chart is a chart. Once you know how to read and understand exactly how stocks trade then you will open up another universe in your option trading opportunities.

If you are interested in learning more, send me an email.

The market is looking to open higher after Walt Disney (DIS, $23.15, up $0.29) beat estimates. Bank of America (BAC, $10.84, up $0.46) is getting some early action on the heels of the stress test results which are due Thursday. Watch the Bank of America June 13 calls (BYOFM, $0.95, up $0.05) this morning. They could have a huge day.

Rick Rouse