Trade-Ideas LLC identified

American Capital

(

ACAS

) 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 American Capital as such a stock due to the following factors:

  • ACAS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $58.6 million.
  • ACAS has traded 1.5 million shares today.
  • ACAS is trading at 3.29 times the normal volume for the stock at this time of day.
  • ACAS 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in ACAS with the Ticky from Trade-Ideas. See the FREE profile for ACAS NOW at Trade-Ideas

More details on ACAS:

TheStreet Recommends

American Capital, Ltd. is a private equity and venture capital firm specializing in management and employee buyouts, subordinated debt, leveraged finance, mezzanine, acquisition, recapitalization, middle market, early venture, mature, industry consolidation, and growth capital investments. ACAS has a PE ratio of 21. Currently there are 4 analysts that rate American Capital a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for American Capital has been 2.4 million shares per day over the past 30 days. American has a market cap of $3.5 billion and is part of the financial sector and financial services industry. The stock has a beta of 0.94 and a short float of 2% with 1.24 days to cover. Shares are down 6.2% year-to-date as of the close of trading on Thursday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates American Capital as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, deteriorating net income, disappointing return on equity and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • The share price of AMERICAN CAPITAL LTD has not done very well: it is down 11.22% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • 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 Capital Markets industry. The net income has significantly decreased by 132.4% when compared to the same quarter one year ago, falling from $114.00 million to -$37.00 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, AMERICAN CAPITAL LTD underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • AMERICAN CAPITAL LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AMERICAN CAPITAL LTD increased its bottom line by earning $1.56 versus $0.50 in the prior year. For the next year, the market is expecting a contraction of 26.3% in earnings ($1.15 versus $1.56).
  • The gross profit margin for AMERICAN CAPITAL LTD is currently very high, coming in at 73.30%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -21.02% is in-line with the industry average.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.