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 Valero Energy ( VLO) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Valero Energy as such a stock due to the following factors:

  • VLO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $493.5 million.
  • VLO has traded 1.1 million shares today.
  • VLO is trading at 1.59 times the normal volume for the stock at this time of day.
  • VLO crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on VLO:

Valero Energy Corporation operates as an independent petroleum refining and marketing company in the United States, Canada, the Caribbean, the United Kingdom, and Ireland. It operates through two segments, Refining and Ethanol. The stock currently has a dividend yield of 2.3%. VLO has a PE ratio of 6.7. Currently there are 9 analysts that rate Valero Energy a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Valero Energy has been 7.7 million shares per day over the past 30 days. Valero Energy has a market cap of $25.0 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.02 and a short float of 3.7% with 2.02 days to cover. Shares are up 1.3% year-to-date as of the close of trading on Friday.

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 Valero Energy as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • VALERO ENERGY CORP 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, VALERO ENERGY CORP increased its bottom line by earning $4.97 versus $3.75 in the prior year. This year, the market expects an improvement in earnings ($6.06 versus $4.97).
  • 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 239.4% when compared to the same quarter one year prior, rising from $312.00 million to $1,059.00 million.
  • Net operating cash flow has significantly increased by 744.34% to $1,866.00 million when compared to the same quarter last year. In addition, VALERO ENERGY CORP has also vastly surpassed the industry average cash flow growth rate of -2.42%.
  • The current debt-to-equity ratio, 0.31, 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 0.92 is somewhat weak and could be cause for future problems.

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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