EOT Trade Alert – September 9, 2015

Trade Alert:

Buy MAR October 16th 2015 $72.50 puts at $2.80 or better

 

Company Background:

Marriott International (MAR) operates, franchises, and licenses hotels and timeshare properties worldwide.

 

Short-Term Catalyst:

Marriott’s stock has been in a steady decline since reaching a high of $84.45 in March.

The main reason for the poor performance has been the poor performance of their properties outside the US.  Revenue per available room from their international properties has been lagging behind those of their US properties.

As a result of the slower growth, the stock has become expensive based on their current and future earnings.  Right now the stock is trading at a P/E of nearly 25 and a forward P/E of over 19.  And that’s after a 15% decline in the stock price.

Based on their current earnings estimates, the stock is simply too expensive to present a good buying opportunity for investors.

What’s more, the price action is undeniably bearish.

MAR has made a series of lower highs and lower lows… a characteristic of a stock stuck in a bearish downtrend.  During that time, the 50-day moving average has been a stiff resistance level that has triggered a reversal to the downside.

Right now, MAR is once again bumping up against the 50-day moving average.  And the price action today is indicative of another reversal from this technical resistance level.

All signs point toward MAR making a move to the downside in the coming weeks.  In fact, I wouldn’t be surprised to see MAR fall back to the recent low around $65.00.

Let’s grab put options on MAR to profit from this bearish technical setup.

 

Trade Details:

Underlying Stock Symbol:	MAR
Current Bid-Ask Price:	$2.65 – $2.75
Option “Buy Up To” Price:	$2.80
Break-Even On Stock At Expiration:	$69.70
Maximum Risk Per Contract:	$280

 

Exit Strategy:

MAR is trading at $72.01 per share.  Resistance levels will be at $73.00 and again at $74.00.  Remember, we want this stock to move lower.  Support levels will be at $69.00 and $65.00. Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.

 

Chart:

 

Category: EOT Trade Alert