Trade-Ideas LLC identified

Melco Crown Entertainment

(

MPEL

) 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 Melco Crown Entertainment as such a stock due to the following factors:

  • MPEL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $32.7 million.
  • MPEL has traded 411,857 shares today.
  • MPEL traded in a range 212.7% of the normal price range with a price range of $0.89.
  • MPEL traded below its daily resistance level (quality: 9 days, meaning that the stock is crossing a resistance level set by the last 9 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 MPEL:

Melco Crown Entertainment Limited, through its subsidiaries, develops, owns, and operates casino gaming and entertainment casino resort facilities in Asia. The stock currently has a dividend yield of 0.2%. MPEL has a PE ratio of 4. Currently there are 2 analysts that rate Melco Crown Entertainment a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Melco Crown Entertainment has been 3.1 million shares per day over the past 30 days. Melco Crown Entertainment has a market cap of $7.7 billion and is part of the services sector and leisure industry. Shares are down 16.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Melco Crown Entertainment as a

hold

. Among the primary strengths of the company is its revenue growth. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.3%. Since the same quarter one year prior, revenues slightly increased by 4.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MELCO CROWN ENTMT LTD's earnings per share declined by 36.4% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, MELCO CROWN ENTMT LTD reported lower earnings of $0.20 versus $1.10 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus $0.20).
  • The debt-to-equity ratio of 1.06 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, MPEL has managed to keep a strong quick ratio of 2.20, which demonstrates the ability to cover short-term cash needs.
  • 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. When compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, MELCO CROWN ENTMT LTD's return on equity is below that of both the industry average and the S&P 500.
  • 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 34.4% when compared to the same quarter one year ago, falling from $60.63 million to $39.80 million.

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