On his "Mad Money" program last Friday, Jim Cramer outlined his game plan for this week and said he would avoid Marriott International Inc. (MAR) ahead of its third-quarter earnings on Monday because the company had failed to deliver the previous quarter. Marriott is the Stock of the Day for Real Money and we reviewed the charts last month. At the time I wrote, "MAR looks like it is getting extended on the downside. This oversold condition might generate a short-covering advance but it is not likely to go very far. A rally failure could be used by experienced traders to go short MAR looking for a decline to around $95." With earnings scheduled for after the close, let's take another look at the charts and indicators.
In this daily bar chart of MAR, below, we can see that prices did rally after our October update. So far prices have returned to the underside of the declining 50-day moving average line. Some of my favorite technical indicators improved -- the daily On-Balance-Volume (OBV) line has moved up recently with the price action and signals some aggressive buying, which may be short-covering. The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed to the upside last week, generating a cover-shorts buy signal.
In this weekly bar chart of MAR, below, we have a mixed picture. Prices are below the declining 40-week moving average line, so we know that the longer-term trend is down. The weekly OBV line is close to a new high for the move up, suggesting accumulation (buying) during the decline so far this year. The MACD oscillator is in a bearish mode below the zero line, but it has begun to narrow toward a possible cover-shorts buy signal.
In this Point and Figure chart of MAR, below, we have an interesting situation. Prices are in a downtrend from January, but there is now an upside price target of $152.26 being projected. With so much overhead chart resistance on this chart I wonder how prices will be able to rally.
Bottom line strategy: I have no special insight into the quarterly numbers of MAR, but I can admit to staying at a number of Marriott properties in the past few months. The recent sharp recovery suggests to me that really impressive numbers will be needed to maintain those price gains. Like Cramer, I would stand aside for the near term.