Steve Strazza, co-founder of The Chart Report, examines one industry group that’s showing relative strength during the current market volatility: food and beverages. In this interview with Jake Merl, Strazza drills down on some key stocks in the space, discusses the technical setup for Wingstop in particular, and reviews the key levels traders should pay attention to. Filmed on May 14, 2019.
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Taking Cover In Restaurant Stocks (w/ Steve Strazza)
For the full transcript: https://rvtv.io/2w2vNXq
Welcome to Trade Ideas. I’m Jake Merl, sitting down with Steve Strazza, co-founder of The
Chart Report. Steve, great to have you back on the show.
STEVE STRAZZA: Thanks for having me.
JAKE MERL: So, as we’ve seen, the market has taken a pretty big hit this past week or so. Although today,
it looks like stocks are starting to rebound. We’ve made a short-term series of lower highs and lower lows,
specifically talking about the S&P. So, given this market backdrop, are there any specific sectors or industry
groups you’re looking at right now during this time of volatility?
STEVE STRAZZA: So, a lot of market participants like to duck and cover when we enter periods of
volatility like this, the way we like to play it as technicians is just take a step back, zoom out, remember that
the structural trend is still higher and very much in place. And then we want to look for pockets of strength
when we do get these pullbacks because they will offer some great opportunities on the long side in the
right sectors or industry groups like you’re talking about.
So, one way that I do that is just following my normal process. Typically, on the weekends, I’ll look through
different watchlists. To that, I always look at- I’ll typically look at throughout the week also is all three of the
Dow 30 components. And I look at a list of basically a lot of US ETFs that are basically sectors and subsectors
and industry groups a little, some are thematic ETFs, niche industries. But in doing that, this week, this past
week, after last week’s selling pressure, something stuck out which was just very obvious.
I was looking through my list of Dow stocks and McDonald’s was now the only stock on the list to make a
new high. We had over 50% of Dow components make new monthly lows last week. And in that very rough
tape, McDonald’s actually made a new all-time high. It was its seventh consecutive weekly closing all-time
high, which is pretty impressive. So, it’s just been stair stepping higher. And that led me to look a little bit
further and into the group. So, when I was looking at my US ETFs list, I looked at the food and beverage
ETF. It’s PBJ, also showing a lot of strength, had a bullish engulfing week last week, prices closed higher
again for the fifth consecutive week in that ETF.