Trade-Ideas LLC identified FirstEnergy ( FE) 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 FirstEnergy as such a stock due to the following factors:

  • FE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $132.9 million.
  • FE has traded 725,002 shares today.
  • FE is trading at 1.94 times the normal volume for the stock at this time of day.
  • FE 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 FE:

FirstEnergy Corp., through its subsidiaries, generates, transmits, and distributes electricity in the United States. The company operates through Regulated Distribution, Regulated Transmission, and Competitive Energy Services segments. The stock currently has a dividend yield of 4.3%. FE has a PE ratio of 24. Currently there are 6 analysts that rate FirstEnergy a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for FirstEnergy has been 4.5 million shares per day over the past 30 days. FirstEnergy has a market cap of $14.1 billion and is part of the utilities sector and utilities industry. The stock has a beta of 0.21 and a short float of 1.4% with 1.34 days to cover. Shares are up 4.1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates FirstEnergy as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 1.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FIRSTENERGY CORP has improved earnings per share by 27.4% 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 year. We feel that this trend should continue. During the past fiscal year, FIRSTENERGY CORP increased its bottom line by earning $1.37 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $1.37).
  • 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 Electric Utilities industry average. The net income increased by 26.1% when compared to the same quarter one year prior, rising from -$306.00 million to -$226.00 million.
  • Net operating cash flow has increased to $1,130.00 million or 15.77% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.77%.
  • 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. When compared to other companies in the Electric Utilities industry and the overall market, FIRSTENERGY CORP's return on equity is below that of both the industry average and the S&P 500.

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