As U.S. auto sales fall to their lowest level in two years and auto loan delinquencies continue to rise, Carter Worth of Cornerstone Macro is ringing the alarm on the beaten-down auto stocks.
"[The] Consumer Discretionary [sector] has been underperforming [the overall market] for the last year, and autos within the Consumer Discretionary are a real mess," Worth said Friday on CNBC's "Options Action." He added that the autos are the single worst area to be invested
"We have essentially moved back to the 2000 peak, and now we've started to roll [lower], and that's not a good setup," Worth explained.
From a technical standpoint, looking at a chart of the NASDAQ Global Auto Index, Worth warned that "as the index has gone up … relative performance [to the S&P 500] is poor. As we've gone higher, you've actually been making new five-year relative lows to the market. It's really bad."
One automaker that has Worth especially concerned is General Motors, as Worth predicts the stock could soon trade below its long-term trend line. "I think you get a break here … I'm looking for a move to these lows at $30," Worth said. That is more than a 10 percent move below current levels. "Sell [it]," he added.
General Motors is set to report earnings before the market open on Friday. Analysts polled by FactSet are anticipating earnings of $1.46 per share on $40.6 billion in revenue.
Shares of GM were trading at the $33.75 range during Monday's session.
More From Options Action
Nike's growing problems. Are big hurdles ahead for Nike? With CNBC's Melissa Lee and the Options Action traders.
Is old tech your best bet? Should you buy Oracle into earnings? With CNBC's Melissa Lee and the Options Action traders.
From bitcoin boom to doom. Bitcoin stocks go bust, with CNBC's Melissa Lee and the Options Action traders.
Mike Khouw of Optimize Advisors gives an overview of how to calculate the implied move for a stock.
Mike Khouw breaks down the critical options concept known as "theta."
What's a call spread, and when should you use it? Mike Khouw breaks down the basics of this critical strategy.
Options Action Newsletter:
Sign up to receive exclusive Options Action content. Each month you'll receive an exclusive message from host Melissa Lee and insight directly from one of the members of our Options Action panel. Keep your pulse on the market with the Options Action newsletter.