Avoid these Oil Stocks in August

HP and HAL stocks have struggled in 2017

Jul 27, 2017 at 2:45 PM
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With July coming to a close, it's time to look ahead at the worst stocks to own in August. Interestingly, two stocks that traders might want to avoid are from the oil sector: oilfield services giant Halliburton Company (NYSE:HAL) and drilling expert Helmerich & Payne, Inc. (NYSE:HP). Let's take a closer look at HAL and HP stocks. 

worst stocks to own

Bearish Analyst Attention Could Sink Halliburton Stock

The chart above, compiled by Schaeffer's Senior Quantitative Analyst Rocky white, reveals the worst-performing S&P 500 Index (SPX) stocks over the past 10 years. As you can see, HAL stock has struggled mightily, closing the month higher just twice, and averaging a loss of 2.7%. 

And it's certainly not like Halliburton shares are carrying any positive momentum into the month this year. Specifically, the equity has been trending lower since the start of the year, losing more than one-fifth of its value to trade at $42.78, while a recent outbreak attempt was quickly thwarted by its 80-day moving average. 

Despite this, there's a staggering amount of optimism in the analyst community. Most notably, 18 of 22 brokerage firms rate the shares a "strong buy" or "buy," with just one "strong sell" rating on the books. Moreover, HAL's average 12-month price target is $54.67 -- a nearly 28% premium to currently levels. It would appear Halliburton is overdue for bearish analyst attention, which could pressure it even more on the charts. 

Short Sellers Flock to HP Stock

HP stock has only finished one August higher in the past 10 years, averaging a loss of 3.8%. Plus, its chart is strikingly similar to Halliburton's, with the shares steadily declining since early in the year, and their recent rally attempt was cut short by their 80-day moving average. Overall, Helmerich & Payne is down 32% year-to-date to trade at $52.29. 

In the meantime, short sellers have been piling on. During the last two reporting periods, short interest is up almost 10%, and now almost 22% of the stock's float is dedicated to short interest. While normally we view elevated short interest levels as a bullish contrarian signal, HP's weak performance suggests short sellers are more likely to double down on their bets instead of cover, and that would work against Helmerich & Payne on the charts. 

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