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 Diamondback Energy ( FANG) 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 Diamondback Energy as such a stock due to the following factors:

  • FANG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $100.6 million.
  • FANG has traded 1.6 million shares today.
  • FANG is trading at 1.62 times the normal volume for the stock at this time of day.
  • FANG 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 FANG:

Diamondback Energy, Inc., an independent oil and natural gas company, focuses on the acquisition, development, exploration, and exploitation of onshore oil and natural gas reserves in the Permian Basin in West Texas. FANG has a PE ratio of 21. Currently there are 13 analysts that rate Diamondback Energy a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Diamondback Energy has been 1.2 million shares per day over the past 30 days. Diamondback Energy has a market cap of $4.0 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.40 and a short float of 7.2% with 2.30 days to cover. Shares are up 14.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Diamondback Energy as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 37.8%. Since the same quarter one year prior, revenues slightly increased by 3.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $99.14 million or 38.72% when compared to the same quarter last year. In addition, DIAMONDBACK ENERGY INC has also vastly surpassed the industry average cash flow growth rate of -48.80%.
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that FANG's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.
  • The share price of DIAMONDBACK ENERGY INC has not done very well: it is down 20.15% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • 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 75.2% when compared to the same quarter one year ago, falling from $23.59 million to $5.85 million.

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