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Trade-Ideas: BP (BP) Is Today's "Storm The Castle" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified BP ( BP) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified BP as such a stock due to the following factors:

  • BP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $176.8 million.
  • BP has traded 2.9 million shares today.
  • BP is trading at 3.71 times the normal volume for the stock at this time of day.
  • BP crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on BP:

BP p.l.c. provides fuel for transportation, energy for heat and light, lubricants to engines, and petrochemicals products. The stock currently has a dividend yield of 5.1%. BP has a PE ratio of 11.6. Currently there are 5 analysts that rate BP a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for BP has been 4.8 million shares per day over the past 30 days. BP has a market cap of $132.9 billion and is part of the basic materials sector and energy industry. Shares are up 2% year to date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates BP as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels, good cash flow from operations, impressive record of earnings per share growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 234.4% when compared to the same quarter one year prior, rising from -$1,519.00 million to $2,042.00 million.
  • Net operating cash flow has increased to $5,387.00 million or 22.34% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -15.63%.
  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.96 is somewhat weak and could be cause for future problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, BP PLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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