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

Reliance Steel and Aluminum

(

RS

) 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 Reliance Steel and Aluminum as such a stock due to the following factors:

  • RS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $64.1 million.
  • RS has traded 228,259 shares today.
  • RS is trading at 1.66 times the normal volume for the stock at this time of day.
  • RS 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 RS:

Reliance Steel & Aluminum Co. operates as a metals service center company. The stock currently has a dividend yield of 2.7%. RS has a PE ratio of 13. Currently there are 5 analysts that rate Reliance Steel and Aluminum a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Reliance Steel and Aluminum has been 579,000 shares per day over the past 30 days. Reliance Steel and Aluminum has a market cap of $4.5 billion and is part of the basic materials sector and metals & mining industry. The stock has a beta of 1.15 and a short float of 1.1% with 0.77 days to cover. Shares are down 2.3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Reliance Steel and Aluminum as a

buy

. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • Net operating cash flow has significantly increased by 618.67% to $292.50 million when compared to the same quarter last year. In addition, RELIANCE STEEL & ALUMINUM CO has also vastly surpassed the industry average cash flow growth rate of -53.97%.
  • Despite currently having a low debt-to-equity ratio of 0.55, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that RS's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.78 is high and demonstrates strong liquidity.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, RELIANCE STEEL & ALUMINUM CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Despite the weak revenue results, RS has outperformed against the industry average of 17.4%. Since the same quarter one year prior, revenues slightly dropped by 7.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • RELIANCE STEEL & ALUMINUM CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, RELIANCE STEEL & ALUMINUM CO increased its bottom line by earning $4.72 versus $4.15 in the prior year. For the next year, the market is expecting a contraction of 0.4% in earnings ($4.70 versus $4.72).

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