Trade-Ideas LLC identified

Westlake Chemical

(

WLK

) 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 Westlake Chemical as such a stock due to the following factors:

  • WLK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $38.6 million.
  • WLK has traded 72,561 shares today.
  • WLK traded in a range 210.9% of the normal price range with a price range of $2.17.
  • WLK traded below its daily resistance level (quality: 16 days, meaning that the stock is crossing a resistance level set by the last 16 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 WLK:

Westlake Chemical Corporation manufactures and markets basic chemicals, vinyls, polymers, and building products. It operates through two segments, Olefins and Vinyls. The stock currently has a dividend yield of 1.6%. WLK has a PE ratio of 1. Currently there are 4 analysts that rate Westlake Chemical a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Westlake Chemical has been 1.2 million shares per day over the past 30 days. Westlake Chemical has a market cap of $6.0 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 1.65 and a short float of 13.7% with 5.99 days to cover. Shares are down 14.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Westlake Chemical as a

hold

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • WLK's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.34, which clearly demonstrates the ability to cover short-term cash needs.
  • WLK, with its decline in revenue, slightly underperformed the industry average of 5.7%. Since the same quarter one year prior, revenues fell by 11.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Looking at the price performance of WLK's shares over the past 12 months, there is not much good news to report: the stock is down 26.36%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • WESTLAKE CHEMICAL CORP's earnings per share declined by 14.5% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, WESTLAKE CHEMICAL CORP reported lower earnings of $4.86 versus $5.06 in the prior year. For the next year, the market is expecting a contraction of 20.8% in earnings ($3.85 versus $4.86).

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