Trade-Ideas LLC identified

JC Penney

(

JCP

) 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 JC Penney as such a stock due to the following factors:

  • JCP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $94.2 million.
  • JCP has traded 20.6 million shares today.
  • JCP is trading at 2.56 times the normal volume for the stock at this time of day.
  • JCP 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 JCP:

J. C. Penney Company, Inc., through its subsidiary, J. C. Penney Corporation, Inc., sells merchandise through department stores in the United States. Currently there are 6 analysts that rate JC Penney a buy, 3 analysts rate it a sell, and 8 rate it a hold.

The average volume for JC Penney has been 12.8 million shares per day over the past 30 days. JC Penney has a market cap of $2.3 billion and is part of the services sector and retail industry. The stock has a beta of 0.42 and a short float of 34.4% with 8.44 days to cover. Shares are up 15.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates JC Penney as a

sell

. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and decline in the stock price during the past year.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 3.42 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.23, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Multiline Retail industry and the overall market, PENNEY (J C) CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • JCP is off 7.74% from its price level of one year ago, reflecting the general market trend and ignoring their higher earnings per share compared to the year-earlier quarter. 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.
  • Net operating cash flow has increased to -$232.00 million or 27.50% when compared to the same quarter last year. Despite an increase in cash flow, PENNEY (J C) CO's cash flow growth rate is still lower than the industry average growth rate of 39.76%.
  • 37.35% is the gross profit margin for PENNEY (J C) CO which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -4.72% trails the industry average.

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