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

International Business Machines

(

IBM

) 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 International Business Machines as such a stock due to the following factors:

  • IBM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $781.7 million.
  • IBM has traded 4.3 million shares today.
  • IBM is trading at 2.33 times the normal volume for the stock at this time of day.
  • IBM 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 IBM:

International Business Machines Corporation provides information technology (IT) products and services worldwide. The stock currently has a dividend yield of 2.7%. IBM has a PE ratio of 10.4. Currently there are 4 analysts that rate International Business Machines a buy, 2 analysts rate it a sell, and 11 rate it a hold.

The average volume for International Business Machines has been 4.6 million shares per day over the past 30 days. International Business Machines has a market cap of $162.4 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.88 and a short float of 2.8% with 6.11 days to cover. Shares are up 3.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates International Business Machines as a

hold

. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and generally higher debt management risk.

Highlights from the ratings report include:

  • INTL BUSINESS MACHINES CORP has improved earnings per share by 6.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, INTL BUSINESS MACHINES CORP increased its bottom line by earning $15.68 versus $15.37 in the prior year. This year, the market expects an improvement in earnings ($15.86 versus $15.68).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the IT Services industry and the overall market, INTL BUSINESS MACHINES CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 48.71% is the gross profit margin for INTL BUSINESS MACHINES CORP which we consider to be strong. Regardless of IBM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.88% trails the industry average.
  • The debt-to-equity ratio is very high at 3.20 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, IBM's quick ratio is somewhat strong at 1.03, demonstrating the ability to handle short-term liquidity needs.
  • IBM has underperformed the S&P 500 Index, declining 12.56% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

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