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Continental Resources (CLR) Showing Signs Of Being Water-Logged And Getting Wetter

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 Continental Resources ( CLR) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Continental Resources as such a stock due to the following factors:

  • CLR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $154.9 million.
  • CLR has traded 199,974 shares today.
  • CLR traded in a range 218.4% of the normal price range with a price range of $10.00.
  • CLR traded below its daily resistance level (quality: 27 days, meaning that the stock is crossing a resistance level set by the last 27 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on CLR:

Continental Resources, Inc. engages in the exploration, development, and production of crude oil and natural gas properties in the north, south, and east regions of the United States. CLR has a PE ratio of 30.2. Currently there are 13 analysts that rate Continental Resources a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Continental Resources has been 1.2 million shares per day over the past 30 days. Continental has a market cap of $22.1 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.85 and a short float of 11.5% with 3.46 days to cover. Shares are up 62.2% year to date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Continental Resources as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 9.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 72.17% to $698.83 million when compared to the same quarter last year. In addition, CONTINENTAL RESOURCES INC has also vastly surpassed the industry average cash flow growth rate of -12.83%.
  • The gross profit margin for CONTINENTAL RESOURCES INC is currently very high, coming in at 85.19%. Regardless of CLR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CLR's net profit margin of 29.36% significantly outperformed against the industry.
  • Compared to its closing price of one year ago, CLR's share price has jumped by 58.50%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • CONTINENTAL RESOURCES INC's earnings per share declined by 22.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CONTINENTAL RESOURCES INC increased its bottom line by earning $4.06 versus $2.35 in the prior year. This year, the market expects an improvement in earnings ($5.53 versus $4.06).

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