It was another day of selling for risk assets on Wednesday, March 18. As a result more stocks sank deeper toward long-term technical support levels. One such stock is hotel giant Marriott (NASDAQ:MAR), which fell nearly 70% in recent weeks and has now reached promising long-term technical support.
Before we look at today’s trade idea, allow me to say a couple of words on the current market environment: The historic volatility we are witnessing from stocks to bonds is reflective of investor uncertainty and some structural problems in the markets. For active investors and traders (aside from super-quick day traders), I offer that position size should be reduced, stop losses widened, and time horizons expanded.
I would further offer that the bear market that we have now entered will be littered with ultra-sharp rallies to the tune of 10% – 20% in the S&P 500, which is to say that short-side bets are best to be laid out on rallies and not on big sell-offs.
Likewise, buying after a 10% – 20% rally could be a bull trap for the foreseeable future as it is unlikely that we will see a v-shaped recovery from the markets, nor from the economy.
With that in mind, today’s trade idea in MAR stock is not an immediate gratification one (although the stock of course could rally sharply in the short-term), but one that I want to see work out through the lens of the coming weeks to months.
MAR Stock Charts
On the multi-year weekly chart we see that after achieving a marginal new high in December 2019, MAR stock began to roll over in mid-February along with the broader market.
From the December 2019 highs to yesterday’s intraday lows, however, Marriott stock has now dropped about 70%. As a result it reached a big picture support level.
On the multi-year weekly chart we see that in 2014, MAR stock began to break out of a long-term base as it pushed through and above the $50 level. What took the market six years to accomplish on the upside, it has now erased in a just a few short weeks. With the stock dramatically oversold and assuming no bankruptcy (government loans should help), this stock could be at a major buying opportunity.
On the daily chart we see that MAR stock’s freefall from recent weeks began with a gap down on Feb. 24, which continued after the company’s earnings report and ultimately accelerated due to the coronavirus outbreak.
On Wednesday, March 18, Marriott stock again dropped sharply on the day, but did manage to close the day significantly off the intraday highs. While this does not necessarily signify an ultimate low for the stock, it is an initial sing of seller exhaustion.
Trading Marriott Stock
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In my eye this now offers investors an initial entry point to buy a partial long position in MAR stock anywhere in the high $40s to high $60 range. I understand that is a huge range, but is the meat of yesterday’s trading range.
In the near-term (weeks to months) it is possible the stock rallies quickly toward the $80 mark once the broader market finds at least temporary solace for a relief bounce. Beyond that, the high $40s to low $50s still looks to be a better reward-to-risk level to buy the stock from a longer-term perspective.
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