Trade-Ideas LLC identified

Alkermes

(

ALKS

) 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 Alkermes as such a stock due to the following factors:

  • ALKS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $79.8 million.
  • ALKS has traded 1.2 million shares today.
  • ALKS is trading at 1.52 times the normal volume for the stock at this time of day.
  • ALKS 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 ALKS:

Alkermes Public Limited Company, an integrated biopharmaceutical company, engages in the research, development, and commercialization of pharmaceutical products to address unmet medical needs of patients in various therapeutic areas. Currently there are 5 analysts that rate Alkermes a buy, 2 analysts rate it a sell, and 2 rate it a hold.

The average volume for Alkermes has been 916,800 shares per day over the past 30 days. Alkermes has a market cap of $10.0 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.52 and a short float of 9% with 6.43 days to cover. Shares are up 13.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Alkermes as a

sell

. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • ALKERMES PLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ALKERMES PLC swung to a loss, reporting -$0.22 versus $0.13 in the prior year. For the next year, the market is expecting a contraction of 86.4% in earnings (-$0.41 versus -$0.22).
  • 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 Biotechnology industry. The net income has significantly decreased by 1334.5% when compared to the same quarter one year ago, falling from $3.74 million to -$46.11 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Biotechnology industry and the overall market, ALKERMES PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$15.41 million or 275.52% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ALKS, with its decline in revenue, underperformed when compared the industry average of 8.8%. Since the same quarter one year prior, revenues slightly dropped by 1.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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