BP (BP) Shows Signs Of Being 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 BP ( BP) 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 BP as such a stock due to the following factors:

  • BP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $167.5 million.
  • BP has traded 2.7 million shares today.
  • BP traded in a range 347.3% of the normal price range with a price range of $1.60.
  • BP traded below its daily resistance level (quality: 163 days, meaning that the stock is crossing a resistance level set by the last 163 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 BP:

BP p.l.c. provides fuel for transportation, energy for heat and light, lubricants to engines, and petrochemicals products worldwide. The stock currently has a dividend yield of 5%. BP has a PE ratio of 6.4. Currently there are 5 analysts that rate BP a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for BP has been 4.0 million shares per day over the past 30 days. BP has a market cap of $144.5 billion and is part of the basic materials sector and energy industry. Shares are down 1.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates BP as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 65.0% when compared to the same quarter one year prior, rising from $2,042.00 million to $3,369.00 million.
  • Net operating cash flow has increased to $7,877.00 million or 46.22% when compared to the same quarter last year. In addition, BP PLC has also vastly surpassed the industry average cash flow growth rate of -5.36%.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.

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