Commentary: The recent volatility in the broad market indexes has caused many hotel stocks to trade below their 200-daymoving averages. Long-term moving averages are a common tool used by traders to track changes in the trends of financial assets by smoothing out the day-to-day price fluctuations, or noise. Once the price of an asset falls below an influential level of support, such as the 200-day moving average, it is not uncommon to see the average act as a barrier that prevents the bulls from pushing the price back above that average. A stock that trades below its 200-day moving average is deemed to be in a long-term downtrend and any move toward the average, as shown in the chart below, is often used as a sign to take profit; many short sellers will use these averages as entry points because the price often bounces off the resistance and continues its move lower.
Let's take a look at the charts of a few major hotel chains; they are nearing the resistance of their respective 200-day moving averages, which has been influencing their share prices. Traders will expect the downtrends in these stocks to continue until the price is able to make a sustained move above the identified barriers.
Marriott International (NYSE:MAR) - Taking a look at the daily chart of MAR, you'll notice that it is trading below the resistance of a nearby 200-day moving average, which is a barrier that has controlled the direction of the stock since early 2007. The chart clearly shows that the bears are in control of the longer-term direction and it wouldn't be surprising to see many bullish traders wait until the price closes above the average before taking a position. It it also interesting to note that there is a long-term descending trendline that is trading at the same level. This is technically significant because it will be used by the bears to confirm the strength of the downtrend. The nearby resistance suggests that the bulls will want to steer clear of this stock until they get confirmation that the trend is ready to reverse.
Host Hotels & Resorts Inc. (NYSE:HST) - HST is another hotel chain that has failed to break above the resistance of its 200-day moving average since 2007. As you can see from the chart below, this stock's volatility has recently picked up as the bulls have tried hard to reverse the downtrend. Unfortunately for the bulls, the resistance that has appeared because the combination of the descending trendline and the long-term moving average has proved too strong and the price has dropped off as a result. We expect short-term traders to continue holding a bearish outlook on this stock until the price is able to close above its current resistance levels.
Choice Hotels International Inc. (NYSE:CHH) - Taking a look at the chart of CHH, you'll notice that it is similar to MAR and HST. This company is trading below a level of resistance that it has tested several times this year (shown by the black arrows). In most cases, traders will take profits off the table as the price nears the 200-day moving average (as was the case today); bearish traders may take a short position with a stop loss slightly above the trendline. A break above the resistance level would be a technical cover signal for those traders, and a signal that the bulls are taking control of the momentum. Most traders expect the bears to remain in control. If things continue as they have in the past, the bears should be able to send the price lower off of these levels. Other hotel stocks with charts that are looking extremely similar to the ones mentioned above include:
Wyndham Worldwide Corporation (NYSE:WYN) and LaSalle Hotel Properties(NYSE:LHO), which suggests that the best strategy moving forward may be to wait for resistance levels to be broken, signaling a turnaround in this industry. |
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