Trade-Ideas LLC identified

2U

(

TWOU

) 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 2U as such a stock due to the following factors:

  • TWOU has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $33.2 million.
  • TWOU has traded 1.3 million shares today.
  • TWOU traded in a range 202% of the normal price range with a price range of $3.59.
  • TWOU traded below its daily resistance level (quality: 220 days, meaning that the stock is crossing a resistance level set by the last 220 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 TWOU:

2U, Inc. provides cloud-based software-as-a-service (SaaS) solutions for nonprofit colleges and universities to deliver education to qualified students. Currently there are 5 analysts that rate 2U a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for 2U has been 938,000 shares per day over the past 30 days. 2U has a market cap of $959.5 million and is part of the technology sector and computer software & services industry. Shares are up 17.3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates 2U as a

sell

. The area that we feel has been the company's primary weakness has been its disappointing return on equity.

Highlights from the ratings report include:

  • Compared to other companies in the Diversified Consumer Services industry and the overall market, 2U INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for 2U INC is currently very high, coming in at 79.56%. 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 -27.32% is in-line with the industry average.
  • Net operating cash flow has significantly increased by 980.88% to $7.33 million when compared to the same quarter last year. In addition, 2U INC has also vastly surpassed the industry average cash flow growth rate of 274.75%.
  • TWOU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, TWOU has a quick ratio of 2.25, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Investors have driven up the company's shares by 28.38% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the future course of this stock, we feel that the risks involved in investing in TWOU do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

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