LaSalle Hotel Properties, a real estate investment trust, engages in the purchase, ownership, redevelopment, and leasing of primarily upscale and luxury full-service hotels in convention, resort, and urban business markets in the United States. It owns 34 hotels, totaling approximately 9,200 guest rooms in 15 markets in 11 states and the District of Columbia. The company qualifies as a REIT under the Internal Revenue Code of 1986. As a REIT, it would not be subject to federal corporate income tax to the extent that it distributes at least 90% of its taxable income to its shareholders. The company was founded in 1998 and is based in Bethesda, Maryland.
Please take a look at the 1-yr chart of LHO (LaSalle Hotel Properties) below with my added notations:
Since September of last year LHO has rallied significantly, and over the last (4) months, the stock has formed what appeared to be a Double Top price pattern (blue). Double Tops are reversal patterns and are as simple as they sound: Rallying up to a point (T), selling off to a support, and then rallying back up again to approximately the same top (T). As with any price pattern, a confirmation of the pattern is needed. LHO confirmed this pattern in earlier this week by breaking the $26 support (red) that was been created by the Double Top pattern.
Chart patterns can also provide price targets. Simply take the height of the overall pattern and add or subtract that amount to or from the breakout or breakdown point to get the minimum price objective. For example, since the Double Top pattern for LHO is $4 high ($30 – $26), LHO should fall to a minimum of $22 ($26 – $4). Chart pattern price targets are certainly not guarantees, but they are often fulfilled.
The Tale of the Tape: LHO formed a Double Top price pattern and confirmed it when it broke the $26 support level. The stock should be moving lower overall, thus a short trade should be placed at or near $26 with a stop set above that level.
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!
Christian Tharp, CMT