Todays Big Stock: Starwood Hotels & Resorts (NYSE: HOT)

After writing an article earlier this week on H, I decided to search throughout H’s industry to see if I could find another stock that might also provide a couple of good trading opportunities.  One such stock I found fit that description in H’s industry would be that of Starwood Hotels & Resorts Worldwide Inc.

Starwood Hotels & Resorts Worldwide, Inc. is a hotel and leisure company. The company conducts its hotel and leisure business both directly and through its subsidiaries. Its brand names include St. Regis (luxury full-service hotels, resorts and residences), The Luxury Collection (luxury full-service hotels and resorts), W (luxury and upscale full service hotels, retreats and residences), Westin (luxury and upscale full-service hotels, resorts and residences), Le Meridien (luxury and upscale full-service hotels, resorts and residences), Sheraton (luxury and upscale full-service hotels, resorts and residences), Four Points (select-service hotels), Aloft (select-service hotels), and Element (extended stay hotels). The company is organized into two business segments: hotels and vacation ownership and residential.

To review Starwood’s stock, please take a look at the 1-year chart of HOT (Starwood Hotels & Resorts Worldwide Inc.) below with my added notations:

HOT has created a couple of short-term price levels over the last month. First, HOT has formed a clear resistance area at $45 (red). In addition, the stock has also been climbing a short-term, up-trending support level (green). These two levels combined have HOT stuck within a common chart pattern known as an Ascending Triangle that will eventually have to break one way or another. If the break is higher, the upper levels of $50 and $55 could come into play as well.

A break above $45 should signal higher prices for HOT, but if the stock were to break the up trending support line instead, HOT will most likely hit new 52-week lows.

 

The Tale of the Tape: HOT is currently stuck between two very important levels for the stock: The up-trending support and the $45 resistance. A long trade could be made on a break above the $45 level or on a pullback to the up-trending support (currently near $40) with a stop placed under the level of entry. On the other side, you could enter a short trade on HOT at the $45 resistance or if the stock breaks below the up-trending support level. In that case, a stop should be placed above the level of entry.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

 

Good luck!

Christian Tharp, CMT