3 of February's Worst Performers

In the wake of a down January, February tends to underperform -- or so history tells us. Although it's still early, this trend is so far playing out for the S&P 500 Index (SPX), which is on track to notch a second straight day of losses. Meanwhile, according to Schaeffer's Senior Quantitative Analyst Rocky White, some stocks may struggle more this month -- while others tend to outperform. Specifically, drugmakers Merck & Co., Inc. (NYSE:MRK) and Eli Lilly and Co (NYSE:LLY), as well as airline issue United Continental Holdings Inc (NYSE:UAL) have historically put on some of the worst performances in February.

Since hitting an annual high of $61.70 in early June, MRK has shed 19%. Although the stock has enjoyed some days to the upside -- and appears to have recently found a foothold atop the $50 mark -- it's 1.4% lower today at $50.04, following reports the company's two-decade-long joint vaccine venture with Sanofi SA (ADR) (NYSE:SNY) could be nearing an end.

If past is precedent, MRK's technical turmoil could continue in the near term -- and the round $50 level put to the test. Looking back over the past 10 Februaries, the security has been positive just 20% of the time, averaging a loss of 2.1%. In 2009 alone, the shares surrendered 15.2%!

Short-term option traders, meanwhile, have rarely been as call-heavy toward Merck & Co., Inc. as they are now. In fact, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.49 sits lower than 99% of all comparable readings taken in the past year. In the front-month series, specifically, peak call open interest is found at MRK's February 52.50 strike, where 17,863 contracts currently reside.

Since topping out at a 14-year high of $92.85 last September, LLY has shed almost 18%. Broad-market headwinds have LLY lower today, with the stock off 2.7% at $76.32, but the $76-$78 region appears to be serving as support.

While this area has helped contain the stock in recent sessions, it could be tested this month. Historically, LLY has been positive in just two of the past 10 Februaries, averaging a loss of 2.2%. The equity's worst monthly performance came in 2009, when it surrendered more than one-fifth of its value.

In the meantime, there's plenty of room for analysts to change their tune, should LLY continue to struggle on the charts. Among covering analysts, nine maintain a "strong buy" rating, compared to three "holds" and not a single "sell." Plus, the average 12-month price target of $99.20 stands at a 30% premium to current trading levels. A round of downgrades and/or price-target cuts could translate into a fresh wave of selling pressure.

UAL hit a record high of $72.23 nearly one year ago, and has since gone on to shed 35% of its value. In fact, the shares tagged an annual low of $42.17 on Jan. 20. Today, the security has tumbled 4% to $46.90 amid a sector-wide slump.

What's more, February has just been awful for the shares of UAL. Over the last 10 Februaries, the stock has been positive just two times, averaging a loss of 6.4%. Last year -- in the same month the shares hit their highest perch to date -- UAL went on to log a monthly loss of 6%.

While analysts have remained optimistic -- 91% maintain a "buy" or better rating -- short sellers are starting to up the bearish ante, and in the two most recent reporting periods, short interest rose nearly 31%. Short interest still only accounts for a low 2.7% of United Continental Holdings Inc's available float, though, meaning there's plenty of room for these bears to increase their positions -- a scenario that could likely create additional headwinds for the shares.