Trade-Ideas LLC identified

Clorox

(

CLX

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

  • CLX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $93.0 million.
  • CLX has traded 1.1 million shares today.
  • CLX is trading at 1.54 times the normal volume for the stock at this time of day.
  • CLX 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 CLX:

TheStreet Recommends

The Clorox Company manufactures and markets consumer and professional products worldwide. The company operates in four segments: Cleaning, Household, Lifestyle, and International. The stock currently has a dividend yield of 2.7%. CLX has a PE ratio of 25. Currently there are 2 analysts that rate Clorox a buy, 5 analysts rate it a sell, and 6 rate it a hold.

The average volume for Clorox has been 770,000 shares per day over the past 30 days. Clorox has a market cap of $15.0 billion and is part of the consumer goods sector and consumer durables industry. The stock has a beta of 0.57 and a short float of 6.2% with 9.30 days to cover. Shares are up 5.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Clorox as a

buy

. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, solid stock price performance and growth in earnings per share. 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 revenue growth came in higher than the industry average of 10.0%. Since the same quarter one year prior, revenues slightly increased by 3.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.11% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CLX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • CLOROX CO/DE has improved earnings per share by 10.8% 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, CLOROX CO/DE increased its bottom line by earning $4.59 versus $4.39 in the prior year. This year, the market expects an improvement in earnings ($4.81 versus $4.59).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Products industry. The net income increased by 12.4% when compared to the same quarter one year prior, going from $170.00 million to $191.00 million.
  • 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 Household Products industry and the overall market, CLOROX CO/DE's return on equity significantly exceeds that of both the industry average and the S&P 500.

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