Hyatt Hotels Corporation is a hospitality company which manages, franchises, owns and develops Hyatt-branded hotels, resorts and residential and vacation ownership properties. Hyatt manages its business in three segments: owned and leased hotels, which consists of its owned and leased full service and select service hotels; North American management and franchising, which consists of the company’s management and franchising of properties located in the United States, Canada and the Caribbean, and International management and franchising, which consists of its management and franchising of properties located outside of the United States, Canada and the Caribbean. Its full service hotels and resorts operate under five brands: Park Hyatt, Andaz, Grand Hyatt, Hyatt Regency and Hyatt. Hyatt’s two select service brands are Hyatt Place and Hyatt Summerfield Suites.
To review Hyatt Hotels’ stock, please take a look at the 1-year chart of H (Hyatt Hotels Corporation) below with my added notations:
H has fallen into a sideways, consolidation pattern know as a Rectangle. This type of pattern forms when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. The nice thing about a Rectangle pattern is that it will provide you with clearly defined breakout and breakdown points. For H, the Rectangle pattern formed a $35 resistance (red) and a $30 support (green). Although H has had two failed breakout attempts already, the stock will have to break one of those levels eventually.
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 Rectangle pattern for H is $5 high ($35 – $30), H should climb to a minimum of $40 ($35 + $5) if it breaks above $35 or fall to $25 ($30 – $5) if the stock breaks below the $30 level. Chart pattern price targets are certainly not guarantees, but they are often fulfilled.
The Tale of the Tape: H has formed a very common chart pattern know as a Rectangle. This pattern shows clear breakout and breakdown points for a potential long or short position. For H, a trader could enter a long position at the $30 support or a short position on a rise to $35. However, a lot of traders like to wait for the break up or down to enter the trade. So, a long trade could be made if H were to break above $35 or a short position if the stock breaks below $30.
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