A strategy idea for options trading investors.
Despite this being the first official week of earnings season, the schedule is on the light side. Sure, we’ll get some headline grabbers from JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C), and Google (NASDAQ: GOOG), but that’s about it.
So we’ll have to look beyond the big names, although not too far with our latest trade idea, this time on Marriott International (NYSE: MAR). The hotel and timeshare giant reports after the close on Wednesday, with analysts expecting a 19% gain in EPS from a year ago. That’s a little lower than the average quarterly increases seen over the past year. Plus, the whisper number is a couple of pennies below the consensus analyst estimate, meaning that expectations may be muted.
But we’re not encouraged by MAR’s recent history following earnings reports. In fact, the shares have been lower the week after each of the past four reports, despite missing just one of those estimates.
Typically the stock runs up into earnings and then tumbles, something that the chart is showing again this quarter, although the peak may have already occurred thanks to the market weakness of the past couple of days. Note below how the stock has been soundly rejected by its flat 200-day moving average more than once in the past three months.
Sentiment toward MAR is mixed, with short interest low, the put/call ratio in the middle of its annual range, and a little more than half the covering analysts rating the stock a “buy.” So we’re not getting much of a read here.
Continued economic troubles around the world put leisure companies such as MAR at risk. Of course, it’s not quite that simple. The main issue for us is that the stock has not done well after running up into recent earnings reports. With strong technical resistance in place, we see the odds favoring a repeat of this recent pattern. Buy the MAR Aug 37 Put for two bucks or less.
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