Choosing the Right Hotel or Combination
- Posted by Greg Harmon
- on December 10th, 2012
Readers of my blog know that I like to take long driving vacations. And with Christmas approaching the family will be driving over the river and through the woods to Grandma’s house. It gets you thinking about hotels, which naturally leads to a peek at their charts. Here are a couple mixed and matched that are at an interesting point.
Choice Hotels, $CHH
Choice Hotels, $CHH, has looked good since it put in a Bullish Kicker candle pattern in the beginning of June. With a 4 month rounded consolidation after the 4 steps higher, it is approaching the previous top at 33.58. The zoomed in picture reveals a bullish flag over the last 3 days with a Measured Move higher to 34.80 on a break over the top. It has support for another leg up from the bullish Relative Strength Index (RSI) and the positive Moving Average Convergence Divergence indicator (MACD). This stock looks ready to start the next run higher.
Starwood Hotels & Resorts, $HOT
Starwood Hotels & Resorts, $HOT, is at a different type of crossroads. Having bounced off of a bottom November 15 it has retraced 38.2% of the move lower, a key Fibonacci level, which happens to coincide with the 50, 100 and 200 day Simple Moving Averages (SMA). This is a recipe for a pullback or at least consolidation. The RSI has not been able to get into bullish territory yet but the MACD is diverging, pointing higher. In this name the reaction is what is important. A move over all of the SMA can be bought using the Fibonacci level as a stop, while failure here and a move under 52.50 carries a Measured Move lower to 43.50.
Put the two together, like in the ratio chart of CHH vs HOT above, and an interesting idea emerges. The ascending triangle with a top at 0.62 yields a target 0.66 and then 0.68 on a breech higher, or a 9.6% move. A break below would be set up to retest 0.54, also a near 10% move. Trading this pair, either long 5 shares of CHH against short 3 shares of HOT on a break higher or, on a break lower, short 5 shares of CHH against long 3 shares of HOT can give a large return in a low risk way.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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