Best & Worst Stocks of MLK Week

Regional lenders FITB and SIVB are among the stocks to watch in next week's trading

Jan 17, 2019 at 10:07 AM
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Next week will be a short one for traders, as U.S. equity markets will be closed on Monday, Jan. 21, in honor of Martin Luther King Jr. Day. The federal holiday is observed on the third Monday of each calendar year -- to roughly coincide with the late Dr. King's birth date of Jan. 15 -- and 2019 will mark the 21st year that the stock market has taken part in honoring King's legacy by closing up shop for the day.

That means we currently have exactly 20 years' worth of historical data to sift through when it comes to the stock market's performance surrounding this holiday -- exactly the kind of round number that begs for some analysis. That brings us to our roundup of the best and worst S&P 500 Index (SPX) stocks of MLK week, as displayed in the two tables below.

And while we'll asterisk this data right up front by stating that the MLK observance at the start of the week surely doesn't cause the stock movements described below, there are some noteworthy correlations involved with the timing of the holiday, including its proximity to quarterly earnings releases for a few of these names. So while we wouldn't advise making any trades based purely on historical MLK week returns, these lists can serve as a jumping-off point for additional research into each stock's news and fundamental backdrop for potential short-term trade ideas.

Best S&P Stocks During MLK Week

Take SVB Financial Group (NASDAQ:SIVB), for example. The Santa Clara-based lender is among the list of top 25 S&P stocks during the week after MLK Day, with an average return of 2.74% and a median return of 3.12% for the four-day period. Bear in mind, though, that the Silicon Valley Bank parent reports fourth-quarter earnings next Thursday, Jan. 24 -- and the stock has declined immediately following its last two January earnings reports, which occurred the week after the MLK holiday week in both 2018 and 2017.

With SIVB a week out from its earnings report, the stock is fresh off a breakout above its 50-day moving average, ending a three-month slump below this benchmark short-term trendline. The stock's 24.5% rally off its Christmas Eve closing low has pushed its 14-day Relative Strength Index (RSI) up to 64 as of Wednesday night's close -- not quite into overbought territory yet, but knocking on the door.

Meanwhile, short sellers are taking a keen interest in the regional lender. Short interest on SIVB fell as low as 670,000 shares back in mid-August, but has since more than doubled to 1.47 million shares -- including an 11% increase during the most recent reporting period.

Conversely, analysts have gone all in on the bullish bandwagon, as SIVB boasts no fewer than 15 "buy" or better recommendations out of 16 total ratings. That's a ringing endorsement from Wall Street, but given that the stock is down more than 32% from its August closing high, the shares could be smacked with post-earnings downgrades in the event of any weakness in the quarterly results.

So while SIVB is among the list of post-MLK standouts among SPX components, the current fundamental, technical, and sentiment backdrop suggests the stock might be ripe for a counter-trend play in 2019. For more short-term trade ideas, check out the below list of the top S&P 500 stocks during MLK week over the past decade, sorted by the percentage of positive returns.

best spx stocks mlk week

Worst S&P Stocks During MLK Week

On the flip side of the index, here we have the biggest laggards on the benchmark during MLK week. There are a few names worth calling out among this list -- note Fifth Third Bancorp (NASDAQ:FITB), with its average return totaling a loss of 6.3% for the week, and only 20% of its returns positive.

The Cincinnati-based bank is set to report fourth-quarter results before the market opens on Tuesday, Jan. 22, and ahead of the event, FITB is testing resistance at its 80-day moving average. This trendline has been stubborn resistance since last September.

Auto giant Ford Motor Company (NYSE:F), meanwhile, will announce its own fourth-quarter results after the market closes next Wednesday, Jan. 23. The stock dropped on Tuesday in the wake of a poorly received forecast for the quarter, which means some of the usual post-MLK downside may be priced in already.

In fact, during the past 10 days, speculative players on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.22 put options for every call on Ford stock. This put/call volume ratio registers in the 94th percentile of its annual range, which means traders are displaying near-peak levels of bearish sentiment toward F ahead of next week's earnings announcement -- again, indicating a generous degree of pessimism is baked into the share price ahead of a seasonally bearish stretch for the stock.

Below is the full listing of the worst performing S&P 500 component stocks during the post-MLK week, sorted by the percentage of positive returns. Enjoy the holiday weekend, and best of luck in your trading.

worst spx stocks mlk week


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