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

Lincoln National

(

LNC

) 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 Lincoln National as such a stock due to the following factors:

  • LNC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $95.6 million.
  • LNC has traded 234,548 shares today.
  • LNC is trading at 1.64 times the normal volume for the stock at this time of day.
  • LNC 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 LNC:

Lincoln National Corporation, through its subsidiaries, engages in multiple insurance and retirement businesses in the United States. It operates through Annuities, Retirement Plan Services, Life Insurance, and Group Protection segments. The stock currently has a dividend yield of 1.4%. LNC has a PE ratio of 1. Currently there are 6 analysts that rate Lincoln National a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Lincoln National has been 1.8 million shares per day over the past 30 days. Lincoln has a market cap of $14.5 billion and is part of the financial sector and insurance industry. The stock has a beta of 1.71 and a short float of 1.7% with 2.60 days to cover. Shares are up 1.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Lincoln National as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, solid stock price performance, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 4.0%. 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.
  • LINCOLN NATIONAL CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, LINCOLN NATIONAL CORP increased its bottom line by earning $5.66 versus $4.53 in the prior year. This year, the market expects an improvement in earnings ($6.05 versus $5.66).
  • 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has increased to $296.00 million or 12.54% when compared to the same quarter last year. Despite an increase in cash flow, LINCOLN NATIONAL CORP's average is still marginally south of the industry average growth rate of 12.79%.

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