Will May Be Miserable For These 3 Retail Stocks?

Yesterday, we took a look at three of the best stocks to own in May, historically speaking. Not every stock can be an outperformer, though. Therefore, we'll be evaluating three names that have historically struggled in May, with a particular focus on the retail sector. Specifically, among the worst stocks are Dick's Sporting Goods, Inc. (NYSE:DKS), Nordstrom, Inc. (NYSE:JWN), and Sears Holdings Corp (NASDAQ:SHLD).

Below is a list of the worst performing stocks in May over the past decade, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Qualifying stocks settled above $8 at Wednesday's close, and trade at least one million shares per day or have weekly options. Underneath the list, we'll more closely examine DKS, JWN, and SHLD.

Dick's Sporting Goods, Inc. (NYSE:DKS)

DKS has historically embarrassed itself in May -- not to mention, the second quarter -- advancing just once in the last 10 years. On average, the stock's return during the month is negative 5.5%. As recently as 2014, the shares plummeted 15.6% in May. More recently, DKS has put in a respectable technical effort, but it's currently stalling around the $48 level -- which corresponds with the 100-week moving average. As such, the retail stock -- last seen at $46.06 -- is vulnerable to a downside move.

If history repeats itself, option bulls could be sent packing. Specifically, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 5.09 DKS calls for each put. An unwinding of this optimism could serve as another catalyst lower for the retail stock.

Nordstrom, Inc. (NYSE:JWN)

Over the last decade, JWN has advanced just twice in the month of May. On average, shares of the upscale retailer have lost 3.3%, including 3.9% in 2015. More recently, the stock has pulled back to its 80-day moving average, which is historically a bullish indicator. In the 11 other times this signal has occurred over the past three years, JWN has been positive 100% of the time five days after hitting the trendline, and positive almost two-thirds of the time 21 days out. This time around, though, things aren't going Nordstrom's way, with the stock last seen down 3.7% at $50.80.

Another downbeat May could put the pressure on option bulls. JWN's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.44 ranks in the 70th annual percentile. Meanwhile, short sellers are firmly in control. Short interest rose 10.2% during the most recent reporting period, and accounts for nearly 22% of the stock's float. Additional short-selling activity could drag JWN even lower.

Sears Holdings Corp (NASDAQ:SHLD)

SHLD has been positive just twice in May during the past decade, and averages a single-month loss of 7.7%. Longer term, the retail stock hasn't been any better off. With the shares down 4.4% at $17.26, SHLD's year-to-date deficit is 16%. Plus, the stock's 120-day moving average continues to apply pressure.

Yet, short-term options traders remain call-skewed. In fact, SHLD's Schaeffer's put/call open interest ratio (SOIR) of 0.47 registers south of 99% of all readings taken in the previous 12 months. Should optimism wane in the options pits, the stock could run into headwinds.