Airline stocks are the most overbought they've been in years, chart analyst Matt Maley said Thursday.
Travel stocks were swept up by a broader market sell-off in Thursday's trading session, with airline, hotel and cruise line names paring back after substantial year-to-date rallies.
The reversal could mark the start of a larger setback, particularly for airline stocks, Maley, who is chief market strategist at Miller Tabak, told CNBC's "Trading Nation" on Thursday.
Up more than 180% from the March 2020 lows and 30% just this month, the NYSE Arca Airline Index is "really getting stretched here," Maley said.
"It's getting the most overbought since 2016," he said, pointing to its relative strength index chart.
Individual stocks such as JetBlue are also being overbought on a relative strength basis, Maley said, adding that the name is "getting up to levels where it's seen pullbacks several times over the last few years."
Now, "you're starting to hear more concerns about the variants of the coronavirus that may prolong this shutdown," he said. "If that takes place, then you're really going to see these stocks come down even harder. But either way, they're very overbought and I just think you want to avoid chasing them right now and rather look to buy them if they come back. But I think they're going to have to come back quite a bit because they're just so overbought on a technical basis."
The group isn't void of opportunity, however, longtime investor Nancy Tengler said in the same "Trading Nation" interview.
While Tengler advised against chasing travel stocks at their current levels, she flagged three names likely to benefit from a travel and leisure resurgence, the first being American Express.
"This is a company that is expecting to get back to 70% of 2019 fourth-quarter revenues in the fourth quarter of this year," said Tengler, chief investment officer at Laffer Tengler Investments.
Her second pick was shares of Disney, which is slowly reopening its theme parks to limited, but still-strong demand, she said.
"Then I would dip my toe into a name like Southwest Airlines," Tengler said. "[It] has a fabulous balance sheet, they're in a very strong position and they are domestically focused. And so, even with an increase in variants, I think you're going to start to see people who have been vaccinated start to travel again."
Disclosure: Laffer Tengler Investments owns shares of American Express and Disney.