Oil Stock Eyes Seasonal Headwinds Before Earnings

Plus, 24 other stocks that tend to struggle in August

Jul 30, 2019 at 11:42 AM
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The major market indexes are set to wrap up July with a win, with the S&P 500 Index (SPX) pacing for a monthly gain of 2.4%. However, several stocks could underperform next month, if history is any indicator. While this FAANG stock tends to shine in August, fellow blue chip Exxon Mobil Corporation (NYSE:XOM) could slump -- especially if the oil titan kicks off the month with a negative earnings reaction.

Below are the 25 worst stocks to own in August, looking back 10 years. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, XOM has ended the month higher just 20% of the time, averaging a loss of 2.93% -- making it the worst blue chip on the list.

worst August stocks

As alluded to earlier, Exxon Mobil is slated to report earnings this Friday, Aug. 2. The shares have moved lower the session after five of the last eight earnings reports, including a one-day drop of 2.1% in late April, and a 2.8% decline this time a year ago. Regardless of direction, XOM shares have averaged a post-earnings swing of 2.6% after the last eight reports.

From its Dec. 24 seven-year closing low of $65.51 to April's year-to-date closing high above $83, XOM rallied more than 27%. The equity ultimately took a spill to the $71 area in late May, with subsequent rebound attempts halted at its 200-day moving average. Now, XOM is trading around $75.04 -- and just above a 50% Fibonacci retracement of the aforementioned early 2019 rally. From a longer-term standpoint, the security has been in a channel of lower highs since 2016.

XOM stock chart july 30

Despite the oil stock's struggles of late, options traders have been upping the bullish ante ahead of earnings. Exxon's 10-day call/put volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.31, indicating traders have bought to open more than two XOM calls for every put in the past two weeks. What's more, this ratio stands higher than 86% of all other readings from the past year, pointing to a healthier-than-usual appetite for long calls over puts of late.

The overhead August 77.50 call is home to peak open interest across all series, with more than 17,000 contracts outstanding. In the short term, this abundance of bullish bets overhead could translate into an added layer of options-related resistance for XOM.

 

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