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.

Trade-Ideas LLC identified

Hudson City Bancorp

(

HCBK

) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Hudson City Bancorp as such a stock due to the following factors:

  • HCBK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $52.5 million.
  • HCBK has traded 1.9 million shares today.
  • HCBK is trading at 8.03 times the normal volume for the stock at this time of day.
  • HCBK crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on HCBK:

Hudson City Bancorp, Inc. operates as the holding company of Hudson City Savings Bank that provides various banking products and services in the United States. The stock currently has a dividend yield of 1.5%. HCBK has a PE ratio of 32.8. Currently there are no analysts that rate Hudson City Bancorp a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Hudson City Bancorp has been 3.4 million shares per day over the past 30 days. Hudson City has a market cap of $5.5 billion and is part of the financial sector and banking industry. The stock has a beta of 0.94 and a short float of 0.8% with 0.75 days to cover. Shares are up 3.7% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Hudson City Bancorp as a

buy

. The company's strengths can be seen in multiple areas, such as its expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:

  • HCBK, with its decline in revenue, slightly underperformed the industry average of 5.5%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 42.64% is the gross profit margin for HUDSON CITY BANCORP INC which we consider to be strong. Regardless of HCBK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HCBK's net profit margin of 12.39% is significantly lower than the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Net operating cash flow has significantly decreased to $21.27 million or 75.15% when compared to the same quarter last year. Despite a decrease in cash flow of 75.15%, HUDSON CITY BANCORP INC is still significantly exceeding the industry average of -126.28%.
  • HUDSON CITY BANCORP INC's earnings per share declined by 11.1% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, HUDSON CITY BANCORP INC reported lower earnings of $0.32 versus $0.38 in the prior year. For the next year, the market is expecting a contraction of 70.3% in earnings ($0.10 versus $0.32).

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