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2 Reasons to Short This Oil Stock in August

Andrea Kramer

Oil-and-gas stock Helmerich & Payne, Inc. (NYSE:HP) is in the red with crude futures today, with oil prices set to snap a five-day winning streak. What's more, the worst may be ahead for HP shares, which just flashed a bearish technical signal and are facing seasonal headwinds, if past is prologue.

Helmerich & Payne stock gapped lower last week, following a quarterly revenue miss. The security subsequently bounced into its 40-day moving average, which has been a bearish signal on several occasions during the past three years. Following the last five signals, HP went on to average a three-week loss of 4.2%, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

Today, the equity is already down 5.4% to trade at $47.02, moving back into the red on a year-to-date basis, and set for its lowest close since Dec. 24 -- the session before HP touched an annual low of $44.56. What's more, even if the stock retakes its 40-day trendline, it has to contend with formidable resistance in the overhead $52 area. This is where HP landed after a May bear gap, and represents a 61.8% Fibonacci retracement of the security's rally from its December lows to its April highs.

HP stock chart aug 1

As alluded to earlier, Helmerich & Payne is also facing seasonal headwinds, if history is any indicator. Over the past 10 years, the equity has ended August higher just twice, averaging a one-month loss of 4.2% -- making it one of the worst stocks to own this month.

Despite the oil-and-gas concern's struggles on and off the charts, analysts remain optimistic. In fact, HP boasts a whopping 10 "buy" or better ratings, compared to four lukewarm "holds" and only one "sell." Not to mention the consensus 12-month price target of $57.11 represents a 21% premium to current levels. A round of analyst downgrades or price-target cuts could exacerbate selling pressure on the shares.