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 Linn Energy ( LINE) 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 Linn Energy as such a stock due to the following factors:

  • LINE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $34.0 million.
  • LINE has traded 1.0 million shares today.
  • LINE traded in a range 216.1% of the normal price range with a price range of $1.31.
  • LINE traded below its daily resistance level (quality: 132 days, meaning that the stock is crossing a resistance level set by the last 132 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 LINE:

Linn Energy, LLC, an independent oil and natural gas company, acquires and develops oil and natural gas properties. The company's properties are located in Rockies, the Mid-Continent, the Hugoton Basin, California, the Permian Basin, Michigan, Illinois, and East Texas in the United States. The stock currently has a dividend yield of 9.6%. Currently there are 6 analysts that rate Linn Energy a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Linn Energy has been 1.1 million shares per day over the past 30 days. Linn Energy has a market cap of $10.0 billion and is part of the basic materials sector and energy industry. The stock has a beta of 0.77 and a short float of 4.4% with 7.21 days to cover. Shares are down 3.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Linn Energy as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, increase in stock price during the past year and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 112.18% to $481.15 million when compared to the same quarter last year. In addition, LINN ENERGY LLC has also vastly surpassed the industry average cash flow growth rate of -5.18%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • LINE, with its decline in revenue, underperformed when compared the industry average of 3.0%. Since the same quarter one year prior, revenues fell by 28.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Currently the debt-to-equity ratio of 1.87 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, LINE has a quick ratio of 0.56, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LINN ENERGY LLC's return on equity significantly trails that of both the industry average and the S&P 500.

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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