Sell This Stock in May and Go Away – Schaeffers Research (blog)

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In the past couple of weeks, we’ve outlined several stock market signals that suggest traders shouldn’t be too eager to “sell in May and go away,” as the old adage advises. For one, the massive Dow rally earlier this week sent up historically bullish flares, and the accompanying VIX decline suggested stocks could extend their long-term rally, if past is prologue. However, for stock traders seeking bearish trade ideas, motorcycle mogul Harley-Davidson Inc (NYSE:HOG) tops the list of the 25 worst stocks to own in May.

Stock Trading Ideas for May

For stock traders seeking long ideas, we recently unveiled the 25 best stocks to own in May. What’s more, while the month of May gets a bad rap from the aforementioned “Sell in May” adage, it’s actually second to only July during the first year of a presidential cycle, with the S&P averaging a gain of 1.44% in the last 50 years.

But it’s not all sunshine and roses on Wall Street, obviously. Over the past decade, HOG stock has averaged a loss of 4.89% in May, according to data from Schaeffer’s Senior Quantitative Analyst Rocky White —  among the worst of all S&P 500 Index (SPX) components with at least eight years of data. Further, HOG has ended the month higher just 10% of the time.

HOG stock worst stocks may

HOG Stock Facing Resistance

On the charts, the shares of HOG gapped lower last week after a poorly received earnings showing. The shares are now staring up at multiple layers of resistance in the $59-$60 neighborhood, with the equity last seen flat at $57.88.

To start, the $60 area represents a 61.8% Fibonacci retracement of the stock’s decline from its 2014 peak to its 2016 low. In addition, HOG shares are now south of both their 120-day moving average, which helped contain previous pullbacks over the past several months, and a trendline connecting HOG’s lower highs since February 2016. What’s more, peak open interest in the newly front-month May series of options stands at none other than the round May 60 call, with nearly 3,000 contracts outstanding, which could act as an added layer of options-related resistance in the short term.

harley davidson hog stock chart

HOG Put Options Attractively Priced

If history repeats itself and Harley-Davidson Inc (NYSE:HOG) stock suffers another May swoon, now could be a great time to buy short-term put options. The stock’s Schaeffer’s Volatility Index (SVI) of 23% is higher than just 4% of all other readings from the past year, suggesting HOG’s near-term options are attractively priced right now, in the wake of the recent post-earnings volatility crush.

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