Old timers in the security business always say that your word is your bond, but if an all cash deal comes along it can turn handshakes and plans on its head. Starwood Hotel & Resorts Worldwide (HOT) was going to get in bed with Marriott International (MAR), but now there is an unsolicited offer from a Chinese-led investor group including Anbang, Primavera Capital and J.C. Flowers. This deal would pay $76 a share in cash according to media reports. Shares of HOT are trading up near the deal price this morning. Can we glean anything from the charts?
Shares of HOT have been under accumulation (buying) since December (see the chart, above). The On-Balance-Volume (OBV) line has been rising strongly since December, telling us that volume of trading in HOT has been heavier on days when the stock closed higher. Buying stock even when a stock rallies shows that the buyers are aggressive and are "paying up."
HOT had already rallied above the 50-day Simple Moving Average line, and this morning it has gaped above the 200-day average. People smarter than me and above my pay grade will be analyzing the merits of these two deals, but I would not rule out a further push to the upside to $80 to $81 if someone sweetened the deal. I have no inside track on this -- I am just looking at the October/November highs as the next chart point.
This point and figure chart of HOT, above, gives us another perspective and shows the $81 peak. Do dealmakers look at charts? They probably look at a lot of spreadsheets, but you never know.