Deutsche Bank AG, Barclays PLC Among 25 Worst June Stocks

Bank stocks Deutsche Bank AG (USA) (NYSE:DB) and Barclays PLC (ADR) (NYSE:BCS) have historically underperformed in June

May 31, 2016 at 3:25 PM
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Summer has officially started and, according to an old saying, it may be time to tap the brakes on stocks. While this certainly isn't true of all stocks -- just look at the historical June performances for Amazon.com, Inc. (NASDAQ:AMZN) and Monster Beverage Corporation (NASDAQ:MNST) -- Schaeffer's Senior Quantitative Analyst Rocky White ran the numbers on some of the worst-performing names in June. Making the list were bank stocks Deutsche Bank AG (USA) (NYSE:DB) and Barclays PLC (ADR) (NYSE:BCS), and if history repeats itself, options traders could start hitting the exits en masse.

Worst June stocks May 31

DB is off 2% at $17.77, after CEO John Cryan reiterated that the bank may not be profitable this year. Additionally, Cryan said high profits trigger a "red flag," and "if you are making too much money you need to check if it is still the right thing to do."

Although the stock has been moving higher with its fellow bank stocks in recent weeks, as expectations build that the U.S. Federal Reserve could be on the cusp of raising interest rates, its longer-term trajectory remains to the downside. Year-over-year, shares of DB are down 41%. If past is precedent, the stock could be poised to extend these losses, considering it has averaged a loss of 6.5% over the past 10 Junes, and has been positive just one time.

Nevertheless, options traders have shown a distinct preference for long calls over long puts in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), DB's 10-day call/put volume ratio of 1.22 ranks in the 73rd percentile of its annual range. Should Deutsche Bank AG continue to struggle on the charts, an unwinding of these bullish bets could pressure the shares even lower.

BCS has plunged 3.2% to $10.56, amid reports one of its former employees was charged with insider trading. Longer term, the stock is up 29% from its April 7 four-year low of $8.20, but appears to have run out of steam near the $11 mark -- an area that contained the stock in late January.

Shares of BCS could be ready to stage an even steeper retreat, if history is any guide. In fact, the stock has not logged a positive June over the past 10 years, averaging a monthly loss of 8.1%.

Options traders appear ready for a rebound, though. At the ISE, CBOE, and PHLX, for instance, speculative players have bought to open 2,014 calls on BCS over the past two weeks, compared to just 141 puts. What's more, the resultant 10-day call/put volume ratio of 14.28 ranks in the 83rd annual percentile.

Drilling down on the front-month series, peak call open interest is currently found at Barclays PLC's June 11 strike. This could reinforce the $11 level as a short-term ceiling, as the hedges related to these bets unwind ahead of expiration at the close on Friday, June 17.

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