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 Linn Energy ( LINE) as a weak on high relative volume 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 $27.7 million.
  • LINE has traded 3.2 million shares today.
  • LINE is trading at 10.58 times the normal volume for the stock at this time of day.
  • LINE is trading at a new low 13.12% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. 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 (or avoid losses by trimming weak positions). 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 LINE:

Linn Energy, LLC, an independent oil and natural gas company, acquires and develops oil and natural gas properties in the Unites States. The stock currently has a dividend yield of 26.3%. Currently there is 1 analyst that rates Linn Energy a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Linn Energy has been 3.6 million shares per day over the past 30 days. Linn Energy has a market cap of $1.6 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.15 and a short float of 6% with 1.54 days to cover. Shares are down 60.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Linn Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 82.4% when compared to the same quarter one year ago, falling from -$207.87 million to -$379.13 million.
  • The debt-to-equity ratio is very high at 2.67 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.42, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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.
  • The gross profit margin for LINN ENERGY LLC is rather low; currently it is at 18.08%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -117.80% is significantly below that of the industry average.
  • Net operating cash flow has decreased to $298.78 million or 37.90% when compared to the same quarter last year. Despite a decrease in cash flow LINN ENERGY LLC is still fairing well by exceeding its industry average cash flow growth rate of -48.80%.

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