Stay Away From This Sector in June

DAL stock and UAL stock have been miserable in June over the years

Jun 1, 2017 at 2:52 PM
facebook twitter linkedin


Last week, we took a look at the best stocks to buy in June. It's now time to take a look at the stocks to avoid during the month, according to historical data from Schaeffer's Senior Quantitative Analyst Rocky White. We already located one sector that may struggle during June, and below we outline 25 stocks that could underperform in the short term -- including two airline stocks.

June is a historically lackluster month for the stock market in general. However, leisure stocks -- represented by the PowerShares Dynamic Leisure and Entertainment ETF (PEJ) -- could struggle especially hard, if past is prologue. By the numbers, PEJ has lost an average of 3.1% during the past 10 Junes, ending positive just 30% of the time. 

june etfs

Airline Stocks Could Struggle in June

Next, we looked at the worst individual stocks during June, and as one would expect, some PEJ holdings sport big losses. Two names that stick out are airline stocks Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL). As you can see below, DAL stock has ended June higher only twice in the past 10 years, losing 5.6% on average, and UAL stock also has just two positive finishes during that time, averaging a loss of 9.7%. 

worst june stocks june 1


Put Buying at Annual Extreme on DAL Stock

Taking a closer look at Delta stock, the shares have been trending higher since taking a strong bounce of their 200-day moving average in mid-April. As it stands now, DAL is trading at $49.84 -- just pennies above its year-to-date breakeven level. However, the overhead $52 area has acted as a ceiling for Delta shares of late, and could once again cap the stock's advances.

Compared to what's normally seen, options traders have been unusually bearish on Delta in recent weeks. Specifically, the shares have a 10-day put/call volume ratio of 1.00 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- an annual high. But whether you're bullish or bearish, it's a good time to buy DAL's short-term options, based on its Schaeffer's Volatility Index (SVI) of 27%. This reading ranks lower than 87% of all others from the past year, hinting at unusually low volatility expectations being priced into near-term options. 

Options Attractive on UAL Stock

Turning to United Continental stock, the shares have outperformed their sector peer this year, adding 10.7% year-to-date. In fact, UAL stock hit a record high of $81.69 just last week, and was last seen up 1.3% today at $80.68, after the company announced it'll offer nonstop flights from Los Angeles to Singapore. 

In the options pits, UAL traders have remained call-skewed on an absolute basis, but like its sector peer, the stock has seen a stronger-than-normal interest in long puts. Specifically, United Continental has a 10-day put/call volume ratio of 0.86 at the ISE, CBOE, and PHLX, landing in the 69th annual percentile. Also, its options are attractive right now, from a historical volatility perspective, since its SVI of 30% sits just 15 percentage points from an annual low. 

Bernie's Best Stock Bets for Summer 2021

1608308875

 




 
Special Offers from Schaeffer's Trading Partners