Plus 25 stocks that tended to struggle in June
Lost on Reddit-powered Meme stock craze is that the summer lull is coming over us. When a stock shows up in one of Schaefer’s internal metrics, whether bullish or bearish, it raises its eyebrows. If it comes up on two, it’s worth a deeper look. If there are three bearish signals, the alarm bells will ring. With that in mind, let’s examine three signals that, if the past sets a precedent, could mean a cruel summer is ahead for Dow stock Walgreens Boots Alliance Inc (NASDAQ: WBA).
It’s been a pretty quiet stretch for Walgreens stock, measured by its historic 60-day volatility (HV) of 22.7% – which is in the first percentile of the year. While the WBA is the second-best Dow stock in 2021, up 33.6% year-to-date, it has consolidated below the April 6 high of $ 57.05 in recent months. Directly below that is the 160-week WBA moving average, a trendline with historically bearish implications. According to data from Schaeffer’s senior quantitative analyst Rocky White, stocks have landed within one standard deviation of this trendline seven more times in the past 15 years. Four weeks after those signals, the stock was only up 29% of the time, generating an average negative return of 3.4%. Three months later, WB achieved an average negative return of 5.5%, with only 33% of the returns being positive.
Walgreens stock also appeared on White’s list of the worst performing stocks on the S&P 500 Index (SPX) in June. According to White’s, the WBA had an average negative return of 0.2% over the past 10 years for the month of June, with only 30% of those 10 returns being positive. Additionally, WBA is the only Dow stock on the list.
White also examined stock returns from May 1 through August 31, which dates back to 2010. The summer seasonality of the WBA results in an average negative return of 6%. From its current position, a similar move would take the security below $ 53, expanding the channel of lower highs it has created since hitting a record high of $ 97.30 in August 2015.
That’s three quantitative analyzes that work against WBA. At Schaeffer’s, however, we stick to our contrary expectation analysis principles – namely, doing an objective review of the stock’s technical outlook and sentiment to identify potential opportunities for an option game and avoid the urge to “force” a trade where one does not necessarily do this. Against this background, most analysts are already pessimistic about Walgreens shares, with 10 out of 12 brokerage houses maintaining the ratings “hold” or “sell” in their reporting. Plus, the pharmacy giant was an integral part of the launch of the Covid-19 vaccine in the U.S. and will continue to be a major player in helping Americans get their vaccinations this summer. Just last week, Walgreens announced that it was extending its pharmacy hours in over 4,000 locations to increase the flexibility of vaccine appointments.
Whether you think there is enough tailwind to keep the WBA going or that the stock will fall victim to a host of seasonal headwinds, now is an affordable time to look into short-term WBA options . The Schaeffer’s Volatility Index (SVI) of the share is currently around 25%, which is in the 6th percentile of its annual range. Likewise, Trade-Alert set the 30-day-at-the-money (ATM) implied volatility (IV) of the stock in late trading on June 10th at 30.4% – the lower 27th week low of 23.9%.
Bernie Schaeffer’s subscribers Chart of the week received this comment on Sunday June 13th.