Today's Roof Leaker Stock Is NASDAQ OMX Group (NDAQ)

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 NASDAQ OMX Group ( NDAQ) 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 NASDAQ OMX Group as such a stock due to the following factors:

  • NDAQ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $78.2 million.
  • NDAQ has traded 1.6 million shares today.
  • NDAQ is trading at 6.28 times the normal volume for the stock at this time of day.
  • NDAQ 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 NDAQ:

The NASDAQ OMX Group, Inc. delivers trading, clearing, exchange technology, regulatory, securities listing, and public company services worldwide. It operates in four segments: Market Services, Listing Services, Information Services, and Technology Solutions. The stock currently has a dividend yield of 1.4%. NDAQ has a PE ratio of 17.1. Currently there are 6 analysts that rate NASDAQ OMX Group a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for NASDAQ OMX Group has been 1.4 million shares per day over the past 30 days. NASDAQ OMX Group 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 0.97 and a short float of 2.6% with 1.44 days to cover. Shares are down 7.2% year-to-date as of the close of trading on Monday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NASDAQ OMX Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, growth in earnings per share, increase in net income and attractive valuation levels. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • NDAQ's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 12.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • NASDAQ OMX GROUP INC reported significant earnings per share improvement 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, NASDAQ OMX GROUP INC increased its bottom line by earning $2.24 versus $2.03 in the prior year. This year, the market expects an improvement in earnings ($2.99 versus $2.24).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Financial Services industry. The net income increased by 64.0% when compared to the same quarter one year prior, rising from $86.00 million to $141.00 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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