Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified

ARIAD Pharmaceuticals

(

ARIA

) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified ARIAD Pharmaceuticals as such a stock due to the following factors:

  • ARIA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $71.6 million.
  • ARIA has traded 9.9 million shares today.
  • ARIA is trading at 1.87 times the normal volume for the stock at this time of day.
  • ARIA crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. 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 on. 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 ARIA:

ARIAD Pharmaceuticals, Inc., an oncology company, is engaged in the discovery, development, and commercialization of medicines for cancer patients. Currently there are 5 analysts that rate ARIAD Pharmaceuticals a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for ARIAD Pharmaceuticals has been 8.7 million shares per day over the past 30 days. ARIAD has a market cap of $1.1 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.41 and a short float of 23.9% with 4.64 days to cover. Shares are down 17.7% year-to-date as of the close of trading on Monday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates ARIAD Pharmaceuticals as a

sell

. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • 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, ARIAD PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ARIA's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 67.60%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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 company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Biotechnology industry average, but is greater than that of the S&P 500. The net income increased by 22.9% when compared to the same quarter one year prior, going from -$64.67 million to -$49.82 million.
  • ARIAD PHARMACEUTICALS INC has improved earnings per share by 25.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ARIAD PHARMACEUTICALS INC reported poor results of -$1.49 versus -$1.34 in the prior year. This year, the market expects an improvement in earnings (-$1.05 versus -$1.49).
  • Net operating cash flow has increased to -$52.41 million or 23.43% when compared to the same quarter last year. In addition, ARIAD PHARMACEUTICALS INC has also vastly surpassed the industry average cash flow growth rate of -71.74%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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