TransCanada (TRP) Falls Further As It's 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.

Trade-Ideas LLC identified TransCanada ( TRP) 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 TransCanada as such a stock due to the following factors:

  • TRP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $36.7 million.
  • TRP has traded 621,900 shares today.
  • TRP traded in a range 215.4% of the normal price range with a price range of $1.73.
  • TRP traded below its daily resistance level (quality: 21 days, meaning that the stock is crossing a resistance level set by the last 21 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 TRP:

TransCanada Corporation operates as an energy infrastructure company in North America. The company operates in three segments: Natural Gas Pipelines, Liquids Pipelines, and Energy. The stock currently has a dividend yield of 3%. TRP has a PE ratio of 22.1. Currently there are 2 analysts that rate TransCanada a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for TransCanada has been 1.0 million shares per day over the past 30 days. TransCanada has a market cap of $33.2 billion and is part of the basic materials sector and energy industry. Shares are down 4.7% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates TransCanada as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • 45.41% is the gross profit margin for TRANSCANADA CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.26% is above that of the industry average.
  • Despite the weak revenue results, TRP has significantly outperformed against the industry average of 35.3%. Since the same quarter one year prior, revenues slightly dropped by 0.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • TRANSCANADA CORP's earnings per share declined by 5.2% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, TRANSCANADA CORP increased its bottom line by earning $2.46 versus $2.42 in the prior year.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income has decreased by 5.7% when compared to the same quarter one year ago, dropping from $435.00 million to $410.00 million.
  • 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, TRANSCANADA CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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