Trade-Ideas LLC identified Reynolds American ( RAI) 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 Reynolds American as such a stock due to the following factors:

  • RAI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $296.6 million.
  • RAI has traded 942,095 shares today.
  • RAI traded in a range 205.1% of the normal price range with a price range of $1.87.
  • RAI traded below its daily resistance level (quality: 25 days, meaning that the stock is crossing a resistance level set by the last 25 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 RAI:

Reynolds American Inc., through its subsidiaries, manufactures and sells cigarettes and other tobacco products in the United States. It operates through RJR Tobacco, American Snuff, and Santa Fe segments. The stock currently has a dividend yield of 3%. RAI has a PE ratio of 19. Currently there are 4 analysts that rate Reynolds American a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Reynolds American has been 6.5 million shares per day over the past 30 days. Reynolds American has a market cap of $69.1 billion and is part of the consumer goods sector and tobacco industry. The stock has a beta of 0.89 and a short float of 3.2% with 3.06 days to cover. Shares are up 49.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Reynolds American as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, compelling growth in net income, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 14.5%. Since the same quarter one year prior, revenues rose by 41.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 57.28% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • 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 Tobacco industry average. The net income increased by 40.7% when compared to the same quarter one year prior, rising from $467.00 million to $657.00 million.
  • The gross profit margin for REYNOLDS AMERICAN INC is rather high; currently it is at 56.50%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RAI's net profit margin of 20.78% significantly trails the industry average.
  • The debt-to-equity ratio is somewhat low, currently at 0.97, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that RAI's debt-to-equity ratio is low, the quick ratio, which is currently 0.58, displays a potential problem in covering short-term cash needs.

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