February through June is the strongest period of the year for oil, historically, so it makes sense that a number of oil stocks tend to do very well in April. Over the last 20 years, light crude has moved higher in April 60% of the time, and averaged gains of 3.4%. The stocks discussed below have faired even better, moving higher in April 80% of the time with average gains of well over 5%.
The study of how assets perform at different times of the year is called seasonality. It is not typically a tool that should be used in isolation but can be combined with other trading methods to help confirm trades and entry signals.
Weatherford International plc (WFT) is a powerful April performer. In the last 27 years, it has rallied in April 89% of the time, dropping only three times. Assuming a purchase at the start of the month, and a sale at the month, the average winning trade was 14.33%. In the three losing years, the average loss was -6.65%. The biggest rally a trader would have seen is 50.23%, and the biggest drop -10.01%. These figures are based on monthly closes, so within the month gains and losses may have been temporarily larger. Buying at the start of April, and selling at the end, would have produced an average gain of 12%, including all winning (24) and losing (3) years. Traders could do better (or possibly worse) by incorporating other entry and exit methods, instead of using the rather arbitrary start and end of the month.
Southwestern Energy Co. (SWN) has also rallied in April 89% of the time over the last 27 years. Its performance is very similar to Weatherford, except the losses are slightly smaller on average, as are the winners. In the years the price rallied in April, the average gain was 12.21%. In the three years the price fell, the average loss was -2.92%. The biggest rally during the month of April was 66.42% versus the biggest drop of -5.24%. Again, these are monthly closing figures, so during the month losses or gains could have been larger. Factoring for all winning and losing trades, the average gain in April is 10.53%.
Halliburton Co. (HAL) is another strong April performer, but not as strong as Weatherford and Southwestern. Over the last 27 years, Halliburton has moved higher in April 81% of the time, dropping in only five of those years. In the up years the average gain was 8.28% and in the down years the average loss of -4.47%. Factoring in both the up and downs years, the average gain was 5.92%.The biggest April increase over the period was 30.68%, while the biggest drop was -10.27%.
The Bottom Line
Seasonality stats can help confirm trades and entry signals, but shouldn't be used in isolation. Keep in mind that all the statistics are based on historical data, and may not necessarily be an accurate reflection of what can be expected in the future. The statistics are also based on the opening and closing prices for each month. It is unlikely that a trader would get these exact prices, so in actual trading personal gains and losses may be different than those discussed above. Also, during the month, gains or losses may have been bigger than the largest gains and losses discussed above. Overall, there is a strong historical tendency for these stocks to rally April. We shall see if it continues.
Disclosure: The author doesn't currently have positions in the stocks mentioned.