Airline stocks are the most overbought they’ve been in years, chart analyst Matt Maley stated Thursday.
Travel stocks have been swept up by a broader market sell-off in Thursday’s buying and selling session, with airline, resort and cruise line names paring again after substantial year-to-date rallies.
The reversal may mark the begin of a bigger setback, notably for airline stocks, Maley, who’s chief market strategist at Miller Tabak, advised CNBC’s “Trading Nation” on Thursday.
Up greater than 180% from the March 2020 lows and 30% simply this month, the NYSE Arca Airline Index is “really getting stretched here,” Maley stated.
“It’s getting the most overbought since 2016,” he stated, pointing to its relative energy index chart.
Individual stocks such as JetBlue are additionally being overbought on a relative energy foundation, Maley stated, including that the title is “getting up to levels where it’s seen pullbacks several times over the last few years.”
Now, “you’re starting to hear more concerns about the variants of the coronavirus that may prolong this shutdown,” he stated. “If that takes place, then you’re really going to see these stocks come down even harder. But either way, they’re very overbought and I just think you want to avoid chasing them right now and rather look to buy them if they come back. But I think they’re going to have to come back quite a bit because they’re just so overbought on a technical basis.”
The group is not void of alternative, nevertheless, longtime investor Nancy Tengler stated in the identical “Trading Nation” interview.
While Tengler suggested towards chasing travel stocks at their present ranges, she flagged three names prone to profit from a travel and leisure resurgence, the first being American Express.
“This is a company that is expecting to get back to 70% of 2019 fourth-quarter revenues in the fourth quarter of this year,” stated Tengler, chief funding officer at Laffer Tengler Investments.
Her second choose was shares of Disney, which is slowly reopening its theme parks to restricted, however still-strong demand, she stated.
“Then I might dip my toe into a reputation like Southwest Airlines,” Tengler stated. “[It] has a fabulous balance sheet, they’re in a very strong position and they are domestically focused. And so, even with an increase in variants, I think you’re going to start to see people who have been vaccinated start to travel again.”
Disclosure: Laffer Tengler Investments owns shares of American Express and Disney.