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Strong Volume Reversals For Red Hat Inc and Marriot International Inc (NYSE:RHT) (NYSE:MAR)

|Includes: MAR, Red Hat, Inc. (RHT)

Today two leading stocks staged sharp high volume reversals. Often reversals with this type of volume at or near new highs could lead to further downside action. The first stock that reversed sharply on heavy volume was Red Hat Inc (NYSE:RHT) and the second stock was Marriot International Inc (NYSE:MAR).

Red Hat Inc (NYSE:RHT) is a leading technology company that provides open source software solutions to enterprises worldwide. The stock dropped today after the company guided lower than analysts projections for 2011. The decline in the stock took place on about 13.76 million shares. The stock normally trades 2.1 million a day. This high volume decline usually signals further downside to come. The stock will have good support around the 27.00 and 26.00 levels in the near term.

The second name that formed a bearish topping pattern was Marriot International Inc (NYSE:MAR). The worldwide franchise hotel operator was upgraded this morning by J.P. Morgan. Often when stocks get upgraded at by a major firm at new 52 week highs it often an opportunity to unload the stock. The stock formed in a high volume topping tail on the charts and this is usually a bearish formation. The average volume for the stock is about 3.5 million shares. Today the stock traded over 17 million shares as this could be a sign of distribution. The stock does have support around the 28.00 level and more at the 26.00 level.

It is important to watch extended stocks reverse on heavy volume. This type of action usually leads to further downside.

Nicholas Santiago
Chief Market Strategist