June 30, 2022

Airline stocks are the most overbought in years, chart analyst Matt Maley said Thursday.

Travel stocks were caught in wider market sell-off in Thursday’s trading session, with airline, hotel and cruise company names falling after significant rallies since the start of the year.

The reversal could mark the start of a major setback, particularly for airline stocks, Miller Tabak’s chief marketing strategist Maley told CNBC’s Trading Nation on Thursday.

The NYSE Arca Airline Index is up more than 180% from its March 2020 lows and 30% this month, and is “really stretching here,” said Maley.

“It’s been the most overbought since 2016,” he said, pointing to the relative strength index chart.

Individual stocks like JetBlue are also relatively heavily overbought, Maley said, adding that the name “is rising to levels where it has seen multiple setbacks in recent years”.

“You are now hearing more concerns about the variants of the coronavirus that could prolong this shutdown,” he said. “When that happens, you will really see these stocks drop even more. But either way they are very overbought and I think you want to avoid chasing them now and try to buy them when they are. ” come back. But I think they’re going to have to come back pretty often because they’re just so overbought on a technical basis. “

However, the group has no chance, said longtime investor Nancy Tengler in the same “Trading Nation” interview.

While Tengler advised against tracking travel inventories at their current levels, she pointed out three names that would likely benefit from a travel and leisure resurgence. The first was American Express.

“This is a company that expects to return 70% of its fourth quarter 2019 revenue in the fourth quarter of this year,” said Tengler, chief investment officer at Laffer Tengler Investments.

Her second pick was stocks in Disney, which are slowly reopening their theme parks to limited but still strong demand, she said.

“Then I’d dip my toe in a name like Southwest Airlines,” Tengler said. “”[It] has a fabulous record, they are in a very strong position and they are domestically focused. And so I think that despite an increase in variants, you will see people again who have been vaccinated. “

Disclosure: Laffer Tengler Investments owns shares in American Express and Disney.

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