Hotel Stocks Knocking On An Important Door

By Joey Fundora | September 21, 2010 AAA

While the official news is that we are out of a recession, unemployment remains very high and homeowners are still under the pressure of falling real estate prices. Because there is still plenty of economic pressure on consumers, it would be fair to assume that travel and tourism stocks should be suffering. However, this simply isn't the case. Hotel stocks in particular have been on the rebound since early 2009 and, more recently, have been in a consolidation within their overall uptrends. The stock market is a forward-looking mechanism and perhaps investors have been pricing in a recovery down the road. While the hotel stocks generally remain in a consolidation, some are starting to see an increase in buying and are pushing toward the tops of their recent trading ranges.
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In fact, Wyndham Worldwide Corporation (NYSE:WYN) is actually attempting to clear its current base. WYN rallied steadily higher from July 2009 through April 2010, more than doubling in price. Usually a stock needs to take a breather after such a strong rally, and WYN was no exception. WYN topped out in late April and suffered through some bouts of sharp selling. While the price action was certainly weak, buyers stepped into the stock in the low $20s. WYN began to settle down and continued to work on building a base. Buyers have been stepping up in WYN and it is now attempting a breakout. The high $27 range is the area to watch now; a failure at this level could mean a move back down toward $25-$26.

Source: StockCharts.com

Marriott International (NYSE:MAR) is another hotel stock that has performed well since 2009. While the rally was not as strong as it was for WYN, the price action in MAR overall has been healthy. MAR also began building a base in late April after a sharp climax rally into the $38 level. This level became an emotional high, and may act as stiff resistance moving forward. MAR is lagging WYN in that it is not yet testing for a breakout, but it did clear an important level near $36. This area would be an area to key off of moving forward to see if buyers continue to support any pullbacks. If MAR can hold in this area, it may build enough energy for a breakout at the $38 level.

Source: StockCharts.com

Starwood Hotels & Resorts World (NYSE:HOT) is in a similar pattern to MAR. HOT has been building a base over the past few months and recently cleared an important resistance level just over $50. The lower half of this base is taking the shape of an inverse head and shoulders and with HOT clearing the neckline it could be on its way to a full-fledged breakout soon.

Source: StockCharts.com

Gaylord Entertainment Company (NYSE:GET) is another hotel stock attempting to complete a longer term consolidation. GET suffered through a nasty pullback in early May, as it fell from $34 to $24 in just a few days. Notice how GET would swing wildly as market participants struggled with the change in character for the stock. However, as time passed, GET began to trade more smoothly and the swings were much smaller. GET has been able rebound from the low $20s and settle into a tighter consolidation in the upper $20s over the past three months. GET is now attempting to clear this range, and despite the stiff resistance likely ahead at $34, it could be a stock to watch. The $30 are is the key area to watch in the near term as it has been holding GET back over the past several weeks.

Source: StockCharts.com

The Bottom Line
Whether you agree with the shocking headline that the recession has been over since June, 2009, the bottom line is that the hotel stocks have been performing quite well for a long time. In fact, some of these stocks are right back to where they were when the recession officially began in 2007. The real key for traders is to understand that the economy and the stock market are not in sync on the time scale. The stock market is forward looking while economic measures are, by their nature, backwards looking. The hotel stocks are knocking on an important door here, as they approach a test of the tops of the bases they have been building for several months. A move above resistance could catapult them much higher.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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