Travel & Leisure continues to make headway
Key Takeaways
- Snapback bounce encouraging, but has more work to do, to have confidence of markets beginning a larger rally
- Travel & Leisure stocks have now been rising for four straight weeks and look to be benefitting as COVID-19 cases pullback sharply and the 2nd “reopening” gets underway
- Hotels look to be the strongest part of Travel/Leisure, while both Airlines and Cruise-liners are two former beaten down areas which are now breaking out
Markets got a much needed boost Wednesday following three of the last four “down” days. As daily QQQ charts show below, more is required to suggest a meaningful bounce is getting underway. Structurally, QQQ took a turn for the worse on Monday’s decline and it’s vital that prices recoup the area from 2/9/22, or 366.81. That would help trends turn higher more quickly, allowing for rallies up to 385. Cycles paint a bit more of a grimmer picture in the next week ahead of a rally into mid-March, so it’s difficult to rule out pullbacks to break 343.89, which allows for a possible test of 334-337. Bottom line, this rally is a work in progress, and technical proof is important before trying to catch the lows of such a steep decline.
Multiple Re-opening Trade sectors are showing serious signs of Life
Given the rapid rolling over in COVID-19 in the last month (Fundstrats’s own data shows 7-day Delta of daily cases now down 25 of the last 26 days) many of the Re-opening trades are springing back to life.
Hotels, Cruise-liners, Casinos, Airlines are a few of the groups making the largest moves
Buying into this beaten down group of names requires selectivity, as weekly momentum has been largely negative for the last 11 months. Some like Delta (DAL 0.08% ) have broken out of trends, while the larger JETS 0.95% ETF (Global US Jets ETF) has not yet accomplished this.
As shown below, the Invesco Dynamic Leisure and Entertainment ETF, (one of the few ways to play for a broad-based move in Travel & Leisure via ETF) has jumped for the last four weeks, moving to new highs for 2022. This particular ETF is made up of Hotels, Restaurants, Leisure (55%), Entertainment (23%) Media (11.5%) and Food Staples Retailing (8.17%). ( It should be noted that Airlines are underrepresented in this ETF, weighing in at just 2.40%.)
While more technical progress looks necessary to allow for a larger breakout of the consolidation that’s been in place since Spring 2021, this is an encouraging first step of four straight weeks higher.
Hotels are my pick for the technically strongest area of the “Re-opening trade”
While some of the other groups, i.e. Cruise-liners, or Airlines, are more compressed and for some represent better value than chasing strength, buying/owning the stronger areas like Hotels makes more sense from a trend following perspective, and should carry less risk if/when things go wrong. Stocks like MAR, WH, H, and HLT all have similar long-term bases that have recently given way to breakouts and should be favored for a further bounce into mid-to-late March.
Charts of Marriott International (MAR – $178.33) look to have just broken out of lengthy consolidation patterns going back since January 2018. Such a meaningful four-year breakout likely carries MAR up to $200 without much trouble, and this particular area within Travel/Leisure is considered to be quite attractive here technically speaking.
Airlines look to be breaking out, and also a former laggard to now consider more attractive which can outperform into mid-March.
U.S. Global Jets ETF (JETS 0.95% ) is just exceeding downtrend lines going back since Spring 2021. This is a broad-based way largely Domestic way of playing the Airline trade, with stocks like DAL, LUV, UAL, AAL representing about 40% of exposure.
Delta and United Airlines look to be the strongest of the major domestic carriers, along with Alaska Air (ALK -0.21% ) and all look technically attractive for further gains.
Upside targets for JETS looks to be 24.16 and then 25.32, the latter representing a 61.8% area of Fibonacci resistance along with being near October, November 2021 peaks. While not immediately expected, a pullback down under $21.76 would argue for further consolidation before prices can work higher, and is a risk level for longs.
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