One of my favorite strategies is to buy stocks that remain below prior highs but are in sectors that are already showing strength. As long as the stock is technically sound, it is ripe to play catch-up.

#-ad_banner-#Most technical analysts will agree that a good deal of any stock’s potential for gains depends on the overall strength of its sector. Fundamentally, it makes sense that if there is enough business to go around in the industry then any individual company can take advantage of the demand.

Again, the company has to be sound and also prove that it can rally, because stocks with terrible charts can easily get left behind. Just take a look at RadioShack (OTC: RSHCQ) in a soaring consumer electronics group. 

The hotel sector has generally outperformed the S&P 500 since the entire market corrected in 2011. It stalled in December but now looks to be getting its mojo back on the heels of strong earnings reports from several of the larger-cap member stocks. 

Many stocks in the group show positive technical signs, including rising on-balance volume and up gaps. The former suggests continued demand for shares. The latter proves that demand with a rush to buy creating an imbalance that can only be resolved with an explosive move higher.

My favorite hotel stock right now is one of the group’s largest members, Marriott International (NASDAQ: MAR). 

Since late October, MAR traded in a flat range, and it recently flirted with a breakdown. On Feb. 6, it closed below the bottom of its range and continued lower the next day.

But on Feb. 10, two of its peers — Starwood Hotels & Resorts (NYSE: HOT) and Wyndham Worldwide (NYSE: WYN) — released strong earnings and soared. Marriott rode their coattails for a 5.2% gain, but more importantly, it unequivocally negated its breakdown.  

In technical analysis, failed bearish signals are bullish, and I now expect the stock to move back to the top of its range at a minimum. In my experience, it is quite likely that shares will move to and then through that resistance level for an upside breakout into uncharted territory.

With the market still holding in a long-term bull market, despite recent dips and malaise, and consumers optimistic thanks to lower gasoline prices, this discretionary sector has the wind at its back.

Should MAR break out from its range above roughly $79.50, its objective would be $85. This is derived by projecting the vertical height of the trading range — 5.5 points — up from the breakout point.

Normally, I am reluctant to buy a stock immediately after it jumps 5%, and this is especially true when it is trading right in the middle of a trading range as MAR is now. I call that “no-man’s land” between support and resistance because the dollar risk is roughly the same as the reward. 

However, the strong sector, negation of the breakdown and a relatively high level of short interest make me a bit bolder here. High short interest suggests that any good news will force short sellers to rush to buy shares to cover their positions. It can potentially turbocharge overall demand.

If the stock dips a bit, perhaps by 1 point, then I would consider buying more. Anything lower and the initial analysis would have to be scrapped.

Recommended Trade Setup:

— Buy MAR at the market price
— Set stop-loss at $76
— Set initial price target at $85 for a potential 10% gain in four weeks 

Note: The S&P 500 generates roughly 10% a year, on average. But one indicator just delivered a 20% gain in 14 days. In the past year, the indicator has spotted 29 stocks right before they jumped 10% or more in a month. Get the latest pick here.

This article originally appeared on ProfitableTrading.com: The No. 1 Hotel Stock to Buy, According to the Charts​