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 Spectra Energy ( SE) 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 Spectra Energy as such a stock due to the following factors:

  • SE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $119.1 million.
  • SE has traded 1.9 million shares today.
  • SE traded in a range 229.5% of the normal price range with a price range of $1.43.
  • SE traded below its daily resistance level (quality: 190 days, meaning that the stock is crossing a resistance level set by the last 190 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 SE:

Spectra Energy Corp., through its subsidiaries, owns and operates a portfolio of natural gas-related energy assets in North America. The stock currently has a dividend yield of 3.4%. SE has a PE ratio of 25.0. Currently there are 4 analysts that rate Spectra Energy a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Spectra Energy has been 2.8 million shares per day over the past 30 days. Spectra Energy has a market cap of $25.9 billion and is part of the basic materials sector and energy industry. The stock has a beta of 0.89 and a short float of 2.1% with 4.37 days to cover. Shares are up 8.5% year-to-date as of the close of trading on Wednesday.

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 Spectra Energy as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • SE's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 2.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 42.86% is the gross profit margin for SPECTRA ENERGY CORP which we consider to be strong. Regardless of SE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SE's net profit margin of 11.65% compares favorably to the industry average.
  • SPECTRA ENERGY CORP's earnings per share declined by 26.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SPECTRA ENERGY CORP increased its bottom line by earning $1.55 versus $1.43 in the prior year. This year, the market expects earnings to be in line with last year ($1.55 versus $1.55).
  • 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SPECTRA ENERGY CORP's return on equity is significantly below that of the industry average and is below that of 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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