3 Oil Stocks to Sell by Memorial Day

The oil and gas sector could continue to be in focus after the Memorial Day holiday

by Karee Venema

Published on May 25, 2017 at 3:03 PM
Updated on May 30, 2017 at 10:45 AM

Energy stocks are in focus today, as oil prices crumble in the wake of a disappointing supply cut decision at today's Organization of the Petroleum Exporting Countries (OPEC) meeting. The sector could garner even more negative attention after the Memorial Day weekend, considering several names are featured on the below list of the 25 worst stocks to own during short trading weeks, according to data compiled by Schaeffer's Senior Quantitative Analyst Rocky White. Unlike these best stocks to own during a short week, put buyers may want to drill down on Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR), Transocean LTD (NYSE:RIG), and WPX Energy Inc (NYSE:WPX).

worst stocks to own in short trading weeks

Short Interest Could Create More Trouble for PBR Stock

Since 2010, PBR has averaged a loss of 1% during short trading weeks, and has been positive less than 37% of the time. This would just exacerbate recent technical troubles, with PBR shares down more than 15% since its May 16 close, when Brazil stocks got smacked as corruption allegations were levied against the country's president, Michel Temer. What's more, PBR stock is now trading south of its 80-day and 200-day moving averages.

Amid this negative price action, short sellers have been increasing their exposure, with short interest up 31% in the most recent reporting periods. These bearish bets account for just 1.2% of PBR stock's available float, meaning continued selling pressure from the shorts could translate into bigger headwinds for Petrobras shares.

Sinking RIG Stock at Risk of Bearish Analyst Notes

RIG stock has averaged a loss of 0.9% during short trading weeks, looking back to 2010. The energy stock has been positive 36.4% of the time over that same time frame. This would be nothing new for Transocean shares, which have been in steady decline in recent months. Including today's 6.9% drop that has RIG trading at $9.73, the stock is staring at a 34% year-to-date deficit.

Most analysts are skeptical of RIG shares, but three of the 18 covering brokerages maintain a "strong buy" rating. Plus, the average 12-month price target for Transocean stock stands at $12.75 -- 31.4% above current trading levels. This leaves the door open for downgrades and/or price-target cuts to pressure the stock. Earlier, Jefferies lowered its price target on RIG stock to $11.50.

WPX Worst Stock to Own During Short Trading Weeks

WPX is the worst stock to own during short trading weeks, averaging a loss of 1.1% over the past seven years. The shares have also turned in a positive performance just 39% of the time. More broadly, WPX stock has shed 19.2% in 2017 -- pressured by a trendline connecting a series of lower highs -- and is down 3% today to trade at $11.76.

In spite of this downward spiral, not a single one of the 18 analysts covering WPX stock maintain a "sell" rating. While well-deserved downgrades could translate into selling pressure for WPX Energy shares, continued short selling could also spell trouble for the security. Short interest jumped 11% in the two most recent reporting periods, but accounts for a modest 6.5% of WPX's available float.

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