3 Sizzling Memorial Day Stocks

Chesapeake Energy Corporation (NYSE:CHK), Baker Hughes Incorporated (NYSE:BHI), and Helmerich & Payne, Inc. (NYSE:HP) have all tended to outperform during Memorial Day week

May 26, 2016 at 2:46 PM
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U.S. stock markets will be closed next Monday for the Memorial Day holiday. As Schaeffer's Senior Quantitative Analyst Rocky White noted, stocks have tended to underperform during the Memorial Day week, going back to 2010. However, this trend isn't true of all equities, with energy stocks Chesapeake Energy Corporation (NYSE:CHK), Baker Hughes Incorporated (NYSE:BHI), and Helmerich & Payne, Inc. (NYSE:HP) among those turning in the best performance over the holiday-shortened week during the past 10 years. Here's a closer look at CHK, BHI, and HP as the long weekend approaches.

Best SPX stocks for Memorial Day

After an initial 9% pop, CHK has swung 3.9% lower to trade at $4.18, as oil prices retreat from the highly watched half-century mark. This is just more of the same for a stock that, despite some big moves to the upside, remains almost 72% lower year-over-year.

CHK could get a reprieve next week, though, should history repeat itself. In the past 10 Memorial Day weeks, the equity has been positive 70% of the time, boasting an average return of 2%.

Options traders, meanwhile, have been loading up on long calls over puts at a near-annual-high clip in recent weeks. In fact, Chesapeake Energy Corporation's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 3.37 sits just 1 percentage point from a 52-week peak.

BHI has shed almost 10% since being swiftly rejected by its 200-day moving average in early May -- a move that coincided with the company's thwarted merger plans -- with the stock last seen at $45.71. Longer term, this trendline has helped usher the shares lower since last July.

If past is precedent, the stock could get a much-needed lift during next week's holiday-shortened trading. Specifically, since 2006, BHI has gained an average of 1.5% in the week subsequent to Memorial Day, and has been positive 70% of the time.

In the options pits, speculators have shown a distinct preference for puts over calls among options set to expire in three months or less. Specifically, Baker Hughes Incorporated's Schaeffer's put/call open interest ratio (SOIR) sits at a top-heavy 3.16 -- in the 80th percentile of its annual range.

HP has been positive in seven of the past 10 Memorial Day weeks, returning an average of 2.1%. Another win next week would just be more of the same for a stock that's surged almost 52% since hitting a three-year low of $40.02 on Jan. 20. What's more, the shares are bucking today's broader oil-based sell-off -- up 0.5% at $60.68, after earlier bouncing off their 50-day moving average.

In spite of this outperformance, there's plenty of skepticism levied toward HP. Short interest, for instance, accounts for more than 22% of the stock's available float, or 12.6 times the average daily pace of trading. Plus, more than 77% of analysts maintain a "hold" or worse rating toward the security. Should Helmerich & Payne, Inc. extend its recent uptrend, a capitulation from some of the weaker bearish hands and/or a round of bullish brokerage notes could create fresh tailwinds for the shares.

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