Nasdaq 100 component Marriott International, Inc. (MAR) sold off more than 4% on Monday evening after the company beat second quarter profit estimates while missing on revenues by more than $500 million. A laundry list of disclaimers marred positive forward guidance, replacing a buy-the-news reaction with a rush for the exits that has dropped the hospitality giant into a test of the 2018 low.
This marks the second straight quarter that revenues have sharply underperformed expectations, raising questions about management's execution and accounting methods. The company has also been vague about growth in foreign markets at a time that American brands face a marketing challenge due to Trump administration policies that have affected long-term alliances, friendships and cooperation.
The stock has struggled so far this year, down more than 7% following a strong uptrend that hit an all-time high at $149.21 in January 2018. It broke four-month support at $130 in June and is now trading below the 200-day exponential moving average (EMA) for the first time since November 2016. In turn, this bearish action indicates that Marriott has entered a downtrend that could find its way to support near $116 in the coming weeks. (See also: Top 5 Most Profitable Hotel Companies.)
MAR Long-Term Chart (1998 – 2018)
The stock came public near $18 in March 1998 and got cut in half in the next six months, bottoming out in the single digits. It bounced into the IPO opening print in 1999 and broke out but made little headway, stuck in a volatile trading range that persisted through the internet bubble bear market. Three tests near $13 characterized this choppy period, with that support level coming back into play during the 2008 economic collapse.
A 2004 breakout generated a powerful trend advance that posted impressive gains into 2007, when the stock topped out in the low $50s. It turned sharply lower with world markets in 2008, giving up the bull market returns before bottoming out at nine-year support in the low teens. The subsequent recovery wave took five years to complete a round trip into the prior high, generating an immediate breakout that stalled in the mid-$80s in 2015.
A 2017 breakout posted strong upside into January 2018, topping out near $150 and dropping into a descending triangle that broke support in June, despite relative strength in other Nasdaq 100 components. This underperformance has continued into August and is now generating a critical test at the 2018 low, posted on June 28. Fortunately for shareholders, the monthly stochastics oscillator has now dipped to the same level that ended declines in 2011 and 2015 (blue line). (To learn more, see: Stochastics: An Accurate Buy and Sell Indicator.)
MAR Short-Term Chart (2017 – 2018)
A Fibonacci grid stretched across the rally wave that started in August 2017 organizes price action, with the 200-day EMA coming into alignment with the .382 retracement level. The stock tested that level after breaking the triangle, running into a buzzsaw of selling pressure at new resistance. It is trading under $126 in Tuesday's pre-market, confirming a moving average breakdown while exposing the .618 retracement near $116. Meanwhile, the .786 retracement has aligned at the October breakout level and could act as a magnetic target.
On-balance volume (OBV) has acted well throughout the six-month correction, holding relatively close to February and March highs. In addition, it failed to post a new low after the triangle breakdown, generating a bullish divergence that could limit downside. Taken in context with the stochastics line and minor retracement compared with prior upside, bulls may have an opportunity to repair this sinking ship and revive the broken uptrend. (For more, see: Marriott Completes $13 Billion Starwood Merger.)
The Bottom Line
Marriott stock has broken support at $130 and is testing the 2018 low after weak second quarter results, but hidden technical strength could short-circuit the developing downtrend. (For additional reading, check out: Alibaba Partners with Marriott, Pushes Into Hotels.)
<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>