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.

Trade-Ideas LLC identified Rockwell Automation ( ROK) 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 Rockwell Automation as such a stock due to the following factors:

  • ROK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $124.6 million.
  • ROK has traded 1.2 million shares today.
  • ROK is trading at 1.87 times the normal volume for the stock at this time of day.
  • ROK 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 ROK:

Rockwell Automation, Inc. provides industrial automation power, control, and information solutions. The company operates through two segments, Architecture & Software and Control Products & Solutions. The stock currently has a dividend yield of 2.3%. ROK has a PE ratio of 18.4. Currently there are 8 analysts that rate Rockwell Automation a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for Rockwell Automation has been 1.2 million shares per day over the past 30 days. Rockwell Automation has a market cap of $15.1 billion and is part of the industrial goods sector and industrial industry. The stock has a beta of 1.11 and a short float of 5.1% with 6.26 days to cover. Shares are up 0.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Rockwell Automation as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, ROK has a quick ratio of 1.71, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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. Compared to other companies in the Electrical Equipment industry and the overall market, ROCKWELL AUTOMATION's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 46.25% is the gross profit margin for ROCKWELL AUTOMATION which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.60% is above that of the industry average.
  • Net operating cash flow has increased to $268.20 million or 31.79% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -12.86%.
  • ROCKWELL AUTOMATION has improved earnings per share by 10.6% 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, ROCKWELL AUTOMATION increased its bottom line by earning $5.91 versus $5.36 in the prior year. This year, the market expects an improvement in earnings ($6.59 versus $5.91).

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