Trade-Ideas LLC identified

Arena Pharmaceuticals

(

ARNA

) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Arena Pharmaceuticals as such a stock due to the following factors:

  • ARNA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $5.8 million.
  • ARNA has traded 393,129 shares today.
  • ARNA is trading at 3.03 times the normal volume for the stock at this time of day.
  • ARNA is trading at a new low 9.05% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. 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 (or avoid losses by trimming weak positions). 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 ARNA:

TST Recommends

Arena Pharmaceuticals, Inc., a biopharmaceutical company, discovers, develops, and commercializes novel drugs that target G protein-coupled receptors. The company offers BELVIQ, a drug used to treat chronic weight management in adults. Currently there is 1 analyst that rates Arena Pharmaceuticals a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Arena Pharmaceuticals has been 2.8 million shares per day over the past 30 days. Arena has a market cap of $535.4 million and is part of the health care sector and drugs industry. The stock has a beta of 0.68 and a short float of 13.7% with 10.10 days to cover. Shares are down 36.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Arena Pharmaceuticals 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 generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • ARENA PHARMACEUTICALS INC 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, ARENA PHARMACEUTICALS INC reported poor results of -$0.29 versus -$0.10 in the prior year. For the next year, the market is expecting a contraction of 72.4% in earnings (-$0.50 versus -$0.29).
  • 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 458.4% when compared to the same quarter one year ago, falling from $7.48 million to -$26.81 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 Biotechnology industry and the overall market, ARENA PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 42.90%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 466.66% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The revenue fell significantly faster than the industry average of 10.3%. Since the same quarter one year prior, revenues fell by 28.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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