Analyst: Buy Airlines, Sell Rails And Tesla

March 30, 2015

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Analyst: Buy Airlines, Sell Rails And Tesla

In a new report, analysts at MKM Partners took a close look at some price charts in the stock market and updated their technical outlook for several big names. Here's a summary of their findings.

Sell The Rails

According to the principles of Dow Theory, traders should be watching transportation stocks closely. While the Dow Jones Industrial Average is making higher highs, the Dow Jones Transportation Average has been making lower highs.

All though no "sell" signal has been triggered until both indexes start making lower lows, MKM recommends that worried traders should start by selling rail stocks, as they see the following names as "weak links" in the transportation sector: Con-Way Inc (NYSE: CNW), Canadian Pacific Railway Limited (NYSE: CP), Landstar System Inc (NASDAQ: LSTR) and Norfolk Southern Corp (NYSE: NSC).

Buy The Airlines

While analysts are watching closely to see if airline stocks will follow the rails down, so far the divergence between the two transport subsectors has held.

Traders should watch closely for signs of regression in the airlines or signs of an overall weakening of the transportation sector. However, barring either of those two occurrences, MKM analysts recommend buying the following airline names: Alaska Air Group Inc (NYSE: ALK), JetBlue Airways Corp (NASDAQ: JBLU), Southwest Airlines Co (NYSE: LUV) and United Continental Holdings Inc (NYSE: UAL).

Consumer Staples Holding Strong

Analysts see plenty of strong charts in the consumer staples space.

In the report, MKM highlights the following stocks as buys: Flowers Foods Inc (NYSE: FLO), McCormick & Co Inc (NYSE: MKC) Rite Aid Corp (NYSE: RAD) and The J.M. Smucker Co (NYSE: SJM).

Other Names

The report mentions several other big name stocks, including a warning that traders should sell Tesla Motors Inc (NASDAQ: TSLA) into any rallies due to the technical weakness in the stock's chart.