Trade-Ideas LLC identified

TransCanada

(

TRP

) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified TransCanada as such a stock due to the following factors:

  • TRP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $48.2 million.
  • TRP has traded 1.1 million shares today.
  • TRP traded in a range 237.2% of the normal price range with a price range of $2.00.
  • TRP traded below its daily resistance level (quality: 7 days, meaning that the stock is crossing a resistance level set by the last 7 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on TRP:

TransCanada Corporation operates as an energy infrastructure company in North America. The company operates through three segments: Natural Gas Pipelines, Liquids Pipelines, and Energy. The stock currently has a dividend yield of 4.4%. TRP has a PE ratio of 29. Currently there are 2 analysts that rate TransCanada a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for TransCanada has been 1.3 million shares per day over the past 30 days. TransCanada has a market cap of $26.2 billion and is part of the basic materials sector and energy industry. Shares are up 13.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates TransCanada as a

sell

. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • The debt-to-equity ratio is very high at 2.14 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 0.31, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, TRANSCANADA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • TRANSCANADA CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, TRANSCANADA CORP swung to a loss, reporting -$1.75 versus $2.46 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 604.1% when compared to the same quarter one year ago, falling from $483.00 million to -$2,435.00 million.
  • The share price of TRANSCANADA CORP has not done very well: it is down 16.57% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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