Watch Out: Barbarians At The Gate For Ally Financial (ALLY)

Trade-Ideas LLC identified Ally Financial (ALLY) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

Ally Financial

(

ALLY

) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Ally Financial as such a stock due to the following factors:

  • ALLY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $41.4 million.
  • ALLY has traded 467,669 shares today.
  • ALLY traded in a range 202.7% of the normal price range with a price range of $0.85.
  • ALLY traded above its daily resistance level (quality: 47 days, meaning that the stock is crossing a resistance level set by the last 47 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on ALLY:

Ally Financial Inc., a diversified financial services company, provides a range of financial products and services primarily to automotive dealers and their retail customers in the United States. The stock currently has a dividend yield of 1.8%. Currently there are 6 analysts that rate Ally Financial a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Ally Financial has been 4.1 million shares per day over the past 30 days. Ally Financial has a market cap of $8.4 billion and is part of the financial sector and real estate industry. Shares are down 5.4% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Ally Financial as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Consumer Finance industry. The net income has significantly decreased by 56.6% when compared to the same quarter one year ago, falling from $576.00 million to $250.00 million.
  • The debt-to-equity ratio is very high at 4.88 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Consumer Finance industry and the overall market, ALLY FINANCIAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ALLY has underperformed the S&P 500 Index, declining 22.14% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • ALLY, with its decline in revenue, slightly underperformed the industry average of 1.2%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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