Marriott International, Inc. (MAR) reported earnings per share (EPS) of $0.68 in Monday's first quarter 2020 release, $0.10 worse than market expectations, but the number excluded $0.42 from "impairment charges, bad debt expense, and guarantee revenue" as a result of the coronavirus pandemic. Revenue beat estimates but fell 6.6% year over year to $4.68 billion, highlighting income contraction that has continued through the first half of the second quarter.
The hospitality business has been battered and bruised around the world since the outbreak began, intensified by travel shutdowns in local and international markets. Countries and states are finally making plans to reopen, but Marriott needs more than local travel to begin the long road back to prosperity. That could take far longer than stay-at-home restrictions, with many folks planning to avoid airline travel for the rest of 2020 at a minimum.
Marriott stock sold off about 3% after the pre-market release and is holding within a two-week, seven-point trading range. It got ripped apart between mid-February and mid-March, dropping nearly 70% in just six weeks. The subsequent bounce recouped less than half those losses into the end of the first quarter, giving way to choppy sideways action that has failed to break out above 50-day exponential moving average (EMA) resistance in the mid-$90s.
MAR Long-Term Chart (1998 – 2020)
The company came public at $17.97 in March 1998 and entered an immediate decline that posted an all-time low at $9.69 in October. The subsequent uptick hit a new high in 1999, but sustained buying interest failed to develop, yielding sideways action into a stronger rally impulse that ended at $25.25 just before the Sept. 11 attacks. Price action held support in the low teens after that event, setting the stage for a 2003 uptrend that broke out to new highs in 2004.
The stock posted impressive gains during the mid-decade bull market, lifting to $52 in 2007, ahead of a downturn that accelerated to a 10-year low in the first quarter of 2009. It took five years for the subsequent recovery wave to complete a round trip into the prior high, yielding an immediate breakout and rally that stalled in the mid-$80s in 2015. Price action cleared that barrier after the 2016 election, triggering a final buying spike that topped out near $150 in January 2018.
The price pattern since that time carved a double top that broke to the downside in March, setting off major sell signals. The decline undercut support at the 2016 low before reversing, while the bounce into May stalled within three points of new resistance at the broken December 2018 low just above $100. The monthly stochastic oscillator has crossed into a sell cycle at the same time, indicating that bulls are running out of time to remount that critical level.
MAR Short-Term Chart (2017 – 2020)
The on-balance volume (OBV) accumulation-distribution indicator posted a new high in the fourth quarter of 2019 and entered a distribution phase that accelerated in the first quarter of 2020. OBV cut though the December 2018 low during the rout, while buying power into May has failed to remount broken support. Taken together with highly correlated price action, the stock is getting close to confirming the double top breakdown and a new secular downtrend.
The bounce ended after seven sessions at the narrowly aligned 50-day EMA and .382 Fibonacci retracement, while two April upticks failed to clear resistance. However, the stock is holding relatively close to that barrier, raising the odds for a final rally impulse before bears resume control of the ticker tape. That uptick could tag the psychological $100 level, which has aligned with the .50 retracement. Watch OBV if that happens, looking for convergence or divergence from price.
The Bottom Line
Marriott stock broke down from a two-year double top pattern in March, while the bounce into the second quarter has so far failed to remount new resistance.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.