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Marriott International, Inc. (MAR) shares got pummeled in March, dropping to a six-year low in the mid-$40s, but the stock bounced strongly into the second quarter. The oversold rally stretched more than 60 points into June 5, when the stock reversed at the 200-day exponential moving average (EMA), which was broken in February on heavy volume. The turnaround raises the odds that the three-month uptick has come to an end, with a harsh dose of reality undermining optimism.
This international company depends on business travelers to meet profit and revenue estimates, but air travel is unlikely to recover fully for at least two years, keeping a heavy lid on stock gains. More importantly, the pandemic shutdowns may signal a permanent paradigm shift in which hundreds of corporations rely upon video conferencing to conduct day-to-day business rather than expensive travel.
The stock has not recovered from extensive technical damage despite the advance and is still trading below the December 2018 low, which has narrowly aligned with the moving average above $100. That level also marks the breakdown from a two-year double top pattern, reinforcing heavy resistance. It gapped down from the triple digits earlier this week, undercutting the 50-day EMA, perhaps signaling the final assault above $100 for months or longer.
MAR Long-Term Chart (1998 – 2020)
The company came public near $18 in March 1998, entering an immediate decline that posted an all-time low at $9.69 in October. The subsequent uptick hit new highs in the first quarter of 1999, topping at $22 a few months later. It posted a slightly higher high above $25 in 2001 and held range support in the lower teens through the end of the bear market. Committed bulls then jumped off the sidelines, underpinning impressive gains through the mid-decade bull market.
The uptrend ended near $50 in early 2007, marking the highest high for the next seven years, ahead of a cascading decline that found support just two points above the 1998 low in November. A bounce into the new decade failed to reach the prior high, stalling in the low $40s while establishing resistance that took another three years to overcome. The 2014 breakout reached the 2007 peak quickly, setting off an immediate uptrend that reached the mid-$80s in 2015.
A breakout after the 2016 election topped out near $150 in the first quarter of 2018, with trade war threats undermining business travel with Southeast Asia. A pullback into year end found support near $100, establishing the lower end of a trading range that held intact until a December 2019 breakout that failed after adding just four points. The February decline cut through range support like butter, coming to rest at the lowest low since the first quarter of 2014.
MAR Short-Term Chart (2017 – 2020)
The on-balance volume (OBV) accumulation-distribution indicator topped out eight months after price in 2018 and broke out to a modest new high in December 2019. Selling pressure picked up in February 2020, dropping OBV to a three-year low that is still relatively high within the five-year range. Buying pressure through the second quarter shows modest progress, with gains proportional to price development.
A Fibonacci grid stretched across the first quarter decline places the .618 retracement level right at the 200-day EMA, while the December 2018 low has narrowly aligned with the .50 retracement. This perfect symmetry highlights tough resistance at these levels, which must be mounted to reinstate the bullish long-term outlook. That appears less likely by the day, with market players coming to terms with fallout from COVID-19 and worldwide protests.
The Bottom Line
Marriott's oversold bounce may have come to an end, setting the stage for much lower stock prices.
Disclosure: The author held no positions in the aforementioned securities at the time publication.
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June 18, 2020 at 10:00PM
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