Sifting Through Big Data
This brief is written to give readers timely statistics on major equities before the opening bell. In this article, we identify the strongest seasonal sell signals in the equity markets and use sentiment analysis to determine whether each signal is likely to occur.
Top four "sell" signals for 05/22.
#1) Tyson Foods: (NYSE:TSN) Tyson Foods has an alarmingly strong sell signal for May 22, 2013. As the Seasonalysis data below indicates, there are several 84-day signals, and on average, the stock falls 10% during this period. This has occurred every year for the past nine years.
As seen below, there was a recent influx in "fear" sentiment in news media covering Tyson, which strongly supports the short signal based on historical prices.
#2) PNC Financial Services: (NYSE:PNC) is also historically a poor performer this time of year. On average, a 25 day hold starting on May 22 would cost the investor 4.2%. For individuals with long positions, this may be a nice time to sell covered-calls. See below for sentiment.
The above chart shows how feelings of "uncertainty" have exploded since February.
#3) Tesoro Corporation: (TSO) has an average move of 6% over the 21 day period starting on May 22. The standard deviation of this move is 3.3%, indicating that the stock is not volatile, but has a tendency to sell during this period. As we see below, the end of May is typically the start of a pullback for Tesoro.
#4) Regions Financial: (NYSE:RF) has a signal that should not be ignored. Over the past eight years the stock has dropped an average of 6.7% over the 14 day period following May 22. The standard deviation of this move is 4.9%, which is still significantly smaller than the average move.
The above graphic shows that feelings of "optimism" are approaching index highs. Much of the time, when news sentiment appears to be overly optimistic, investors should expect less-than-optimistic price action.
Compelling seasonal signals are worth noting, particularly when the average move is large. If you are holding any stocks list above, now you have additional criterion to look at. You can use these signals to create a more market-neutral portfolio, hedge your current holdings, or speculate. However you trade, put the odds in your court by relying on quantitative data that can give you an edge in the marketplace.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.