Depending on your political persuasions, you either celebrated Donald J. Trump’s surprise electoral victory vigorously or went into despair. At least on social media, there doesn’t seem to be much in the way of a middle ground. But irrespective of your leanings, one thing stands clears: “The Donald” has been great for the markets.
From equities to cryptocurrencies, multiple asset classes have soared under the implications of a new presidency. Fundamentally, the driving force appears to be that Trump will take a hands-off approach, in line with the Republicans’ general policy of free markets and limited governmental intervention. The same should hold true for the casino business, which makes the VanEck Gaming ETF (BJK) a potentially attractive idea.
Per its prospectus, the exchange-traded fund seeks to closely replicate “the price and yield performance of the MVIS Global Gaming Index, which is intended to track the overall performance of companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology and gaming equipment.” If anything, it could be a value play, given that BJK has only gained 5% this year.
Aside from the political backdrop, what really draws attention to the BJK ETF is the technical performance. True, it hasn’t done much on a year-to-date basis. However, during the midweek session, the fund represented one of the top highlights in Barchart’s “J-Pattern ETFs,” one of the newer screeners found on the analytics platform.
J-Hooks Can Be Powerful Signals for ETFs Too!
The J-Pattern or J-Hook ranks among the most popular tools deployed by technical analysts. Unlike interpretative methodologies — such as the head-and-shoulders bearish reversal pattern — the J-Hook is much more quantitative. Essentially, this signal stems from a probabilistic speculation that the target security will break northward from a cycle of consolidation.
As I mentioned in a previous article, below is the basic anatomy of the J-Hook:
- Initial uptrend: The target security experiences a strong upward movement.
- Pullback/consolidation: Following the initial rise, the stock encounters a brief pullback or sideways consolidation phase.
- Rebound and breakout: After this consolidation period is over, the security begins to rise again, forming the “hook” component of the J-Pattern.
I would imagine that the J-Hook is a common tool for deciphering potential opportunities in individual stocks. Of course, there’s absolutely nothing preventing its use for ETFs. And since these financial vehicles represent a basket of securities, the Hook may be more effective here. The action of one security will likely neither catapult nor sink the entire investment.
In other words, the BJK ETF is more geared to trade alongside its fundamentals. And because the fundamentals are so positive — with Trump again taking a hands-off approach, at least regarding industries of adult discretion — the J-Pattern signal is quite enticing.
Heavy Resistance to $45 with an Eye Above $50
Despite all the talk about the J-Hook, it leaves the investor with a big question: just how high can the BJK ETF go? To be sure, investors should expect a fair amount of resistance leading to the $45 level. However, once past this barrier, a market value above $50 in the near term might not be unreasonable.
First, Barchart readers should consult the Trader’s Cheat Sheet, a free resource that identifies key support and resistance levels. Based on resistance indicators derived from standard deviation formulas, BJK may encounter headwinds between $44.62 to $44.88. An overhang at $45.53 may add a final punch before the bulls may see a relatively clear shot to $50, a key psychological milestone.
Second, BJK previously shot up to above $56 before succumbing to bearish pressure in early 2021. With the energy of a newly incoming administration, it’s well within reason for the ETF to attempt reaching this level again. If I had to put a timetable on it, I’d be looking at a 20% return over the next half-year period, if not shorter.
It’s not the prettiest idea in the world. However, investors seem to be ignoring how a Trump administration may be positive for the gaming industry. For the adventurous market participant, the VanEck Gaming ETF should be on your radar.
