E*Trade Financial (ETFC) Falls Further As It's Water-Logged And Getting Wetter

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified E*Trade Financial ( ETFC) 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 E*Trade Financial as such a stock due to the following factors:

  • ETFC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $68.6 million.
  • ETFC has traded 1.1 million shares today.
  • ETFC traded in a range 252.6% of the normal price range with a price range of $1.11.
  • ETFC 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 ETFC:

E*TRADE Financial Corporation, a financial services company, provides online brokerage and related products and services primarily to individual retail investors under the E*TRADE Financial brand in the United States. Currently there are 2 analysts that rate E*Trade Financial a buy, 2 analysts rate it a sell, and 4 rate it a hold.

The average volume for E*Trade Financial has been 2.7 million shares per day over the past 30 days. E*Trade Financial has a market cap of $6.2 billion and is part of the financial sector and financial services industry. The stock has a beta of 2.36 and a short float of 5.5% with 4.67 days to cover. Shares are up 7.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates E*Trade Financial as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 260.00% and other important driving factors, this stock has surged by 115.92% over the past year, outperforming the rise in the S&P 500 Index during the same period. Although ETFC had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 265.7% when compared to the same quarter one year prior, rising from -$28.63 million to $47.43 million.
  • Net operating cash flow has significantly increased by 77.96% to $618.92 million when compared to the same quarter last year. Despite an increase in cash flow of 77.96%, E TRADE FINANCIAL CORP is still growing at a significantly lower rate than the industry average of 460.58%.
  • ETFC, with its decline in revenue, underperformed when compared the industry average of 1.3%. Since the same quarter one year prior, revenues fell by 15.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 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 Capital Markets industry and the overall market on the basis of return on equity, E TRADE FINANCIAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.

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