Trade-Ideas LLC identified Diamondback Energy ( FANG) as a "roof leaker" (crossing below 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 $87.0 million.
  • FANG has traded 1.0 million shares today.
  • FANG is trading at 1.52 times the normal volume for the stock at this time of day.
  • FANG crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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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. Currently there are 16 analysts that rate Diamondback Energy a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Diamondback Energy has been 1.1 million shares per day over the past 30 days. Diamondback Energy has a market cap of $5.3 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.28 and a short float of 11.1% with 4.32 days to cover. Shares are up 28.1% year-to-date as of the close of trading on Friday.

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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 solid stock price performance, 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 deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, FANG's share price has jumped by 47.41%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Net operating cash flow has significantly increased by 51.50% to $139.82 million 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 -26.50%.
  • FANG's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that FANG's debt-to-equity ratio is low, the quick ratio, which is currently 0.64, displays a potential problem in covering short-term cash needs.
  • 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 458.4% when compared to the same quarter one year ago, falling from $43.74 million to -$156.78 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DIAMONDBACK ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.

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