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 Discovery Communications ( DISCK) 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 Discovery Communications as such a stock due to the following factors:

  • DISCK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $32.4 million.
  • DISCK has traded 186,424 shares today.
  • DISCK traded in a range 200.2% of the normal price range with a price range of $1.75.
  • DISCK traded below its daily resistance level (quality: 180 days, meaning that the stock is crossing a resistance level set by the last 180 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 DISCK:

Discovery Communications, Inc. operates as a media company. The company operates through U.S. Networks; International Networks; and Education and Other segments. DISCK has a PE ratio of 9. Currently there is 1 analyst that rates Discovery Communications a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Discovery Communications has been 1.5 million shares per day over the past 30 days. Discovery has a market cap of $8.2 billion and is part of the services sector and media industry. The stock has a beta of 1.58 and a short float of 0.8% with 1.92 days to cover. Shares are down 10.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Discovery Communications as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, notable return on equity and attractive valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • DISCK's revenue growth has slightly outpaced the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • DISCOVERY COMMUNICATIONS INC has improved earnings per share by 12.1% 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, DISCOVERY COMMUNICATIONS INC increased its bottom line by earning $1.66 versus $1.34 in the prior year. This year, the market expects an improvement in earnings ($5.21 versus $1.66).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Media industry average. The net income increased by 8.7% when compared to the same quarter one year prior, going from $230.00 million to $250.00 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. Compared to other companies in the Media industry and the overall market, DISCOVERY COMMUNICATIONS INC's return on equity exceeds that of both the industry average and the S&P 500.

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