More on Herman Cain’s Hotel Preferences

Herman Cain called me back last night after in an effort to come clean about why he picked Starwood Hotels & Resorts, $HOT, as his top Hotel. Yes he stands by his previous statements (link below) but he remembered something else. He used to frequent Wyndham Worldwide, $WYN, hotels until a ‘situation’ developed. He did not elaborate, but I heard his aide in the background say something about Wolf Blitzer on the other line and then he was off. I guess he is a busy man. Well, with that information I took a look at the ratio chart of $WYN against $HOT and it was obvious that he had changed preferences. Take a look.

The ratio chart above shows that after pulling back to a bottom in October at 0.62 it rose to 0.76 last week forming a Double Top. With the Relative Strength Index (RSI) pulling back from a technically overbought condition and a Moving Average Convergence Divergence (MACD) indicator that is stalled and fading, it looks like there is downside to come in this ratio. A shift from $WYN into $HOT. Further the Shooting Star candle creating the Double Top last Friday was confirmed with a lower doji Monday on large relative volume. This presents a trade idea.

Buy 3 $HOT and sell short 4 $WYN using a ratio of 0.76 as a stop loss and looking for a target of at least 0.70.

This trade risks $2.62-$2.66 to make $8.37-$8.99 or a reward to risk ratio of 3.15:1 on the worst case comparison.

Herman Cain’s Top 3 Hotel Choices

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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.

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