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Transports on track for worst week ever, but one stock may offer safety

Ivana Freitas
VIDEO2:4602:46
Attractive opportunity to get into transports here: Portfolio manager

Transports have hit the skids.

The XTN transportation ETF, which includes airline and rail stocks, had a wild ride on Thursday — ending the day at its lowest level in more than a year after briefly making a recovery midday. The ETF is down 16% for the week, on track for its worst ever weekly decline.

Todd Gordon, managing director of Ascent Wealth Partners, said the ETF's underperformance against the broader S&P 500 is clear. However, he does see potential for the group to bounce back after overshooting one critical level — the 200-week moving average at $58.

The XTN ETF has fallen below that 200-week moving average in early 2016, mid-2016 and late 2018 before bouncing back above it. The ETF ended Thursday's session at $55.69, below the 200-week moving average.

Gordon said one name could offer some form of protection from the broader sell-off — freight stock Werner Enteprises.

"Werner [is] coming back to that 200-day, sort of a nice little support test here trying to hold $33 to $34. If you're looking to scoop and you get confirmation from that XTN, maybe take a look here," Gordon said Thursday on CNBC's "Trading Nation."

John Petrides, portfolio manager of Tocqueville Asset Management, said the outlook on transports comes down to an investor's view on the severity of the coronavirus outbreak.

"If you think this turns into the bubonic plague, then guess what, this group is going down further. If you think this gets contained relatively quickly and we have a V-shaped recovery, well this is going to be a great place to park money," Petrides said during the same segment.

Petrides sees the transportation sector as an attractive opportunity with declining oil prices keeping margins low for the sector.

"If coronavirus is contained, and you have a V-shape recovery, you're going to have a coiled spring where you have this massive upswing in multiple expansion," he said.

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