Trade-Ideas LLC identified

AutoNation

(

AN

) 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 AutoNation as such a stock due to the following factors:

  • AN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $55.1 million.
  • AN has traded 900,565 shares today.
  • AN is trading at 3.43 times the normal volume for the stock at this time of day.
  • AN 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 AN:

AutoNation, Inc., through its subsidiaries, provides new and used automotive and spare parts retail services in the United States. The company operates in three segments: Domestic, Import, and Premium Luxury. AN has a PE ratio of 16. Currently there are 3 analysts that rate AutoNation a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for AutoNation has been 773,600 shares per day over the past 30 days. AutoNation has a market cap of $7.0 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.17 and a short float of 3.9% with 3.20 days to cover. Shares are up 1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates AutoNation as a

buy

. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, increase in net income, revenue growth and reasonable valuation levels. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:

  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. 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.
  • AUTONATION INC has improved earnings per share by 20.5% 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 two years. We feel that this trend should continue. During the past fiscal year, AUTONATION INC increased its bottom line by earning $3.54 versus $3.05 in the prior year. This year, the market expects an improvement in earnings ($4.15 versus $3.54).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 14.6% when compared to the same quarter one year prior, going from $100.40 million to $115.10 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.8%. Since the same quarter one year prior, revenues slightly increased by 9.1%. Growth in the company's revenue appears to have helped boost the earnings per share.

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