Watch this one stock as an indicator for the rest of the group, said Matt Maley, chief market strategist at Miller Tabak.
“The one stock that I think people should look at very closely because it looks just like the charts of all the other airline stocks and basically most of the other travel and leisure names is Delta Air Lines,” Maley told CNBC’s “Trading Nation” on Thursday. “The sell-off more recently hasn’t taken it to an oversold condition. In fact, it’s quite neutral. So it’s going to have to get a lot more oversold before we really want to back up the truck here.”
Delta’s relative strength index, or RSI, is 45. Any reading below 30 suggests oversold conditions. It last traded with an RSI below 30 in April.
“It got back up above its April highs, that old resistance level became new support, it tested that the support level a couple of weeks ago. It’s now testing it again. It looks like it wants to break through. If it does, the momentum money that’s been hot in these names is going to bail on the stock,” Maley said.
He is not the only market watcher wary of the travel stocks right now.
“We’re pretty much avoiding the space right now. Any time you go into the travel and leisure space … you know it’s high beta, highly volatile. So you really have to buckle up,” said John Petrides, portfolio manager at Tocqueville Asset Management, during the same segment.
Delta, for example, is up 52% from a May low. However, it remains down 58% from last July’s high.
“The airlines could be of interest but we want to see the length and the depth of where Covid round two comes through and how far the government will step in to protect this industry if there is another leg down. So we think there’s way too many exogenous variables that are hard to quantify right now to really step into the trade,” said Petrides.