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.

Trade-Ideas LLC identified Melco Crown Entertainment ( MPEL) as a "barbarian at the gate" (strong stocks crossing above resistance 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 $62.2 million.
  • MPEL has traded 431,644 shares today.
  • MPEL traded in a range 213.2% of the normal price range with a price range of $1.65.
  • MPEL traded above its daily resistance level (quality: 100 days, meaning that the stock is crossing a resistance level set by the last 100 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on MPEL:

Melco Crown Entertainment Limited, through its subsidiaries, develops, owns, and operates casino gaming and entertainment resort facilities in Asia. The stock currently has a dividend yield of 1.1%. MPEL has a PE ratio of 18. Currently there are 3 analysts that rate Melco Crown Entertainment a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for Melco Crown Entertainment has been 3.7 million shares per day over the past 30 days. Melco Crown Entertainment has a market cap of $11.3 billion and is part of the services sector and leisure industry. Shares are down 15.4% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Melco Crown Entertainment as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • MPEL's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that MPEL's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.31 is high and demonstrates strong liquidity.
  • MPEL, with its decline in revenue, underperformed when compared the industry average of 4.5%. Since the same quarter one year prior, revenues fell by 22.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 gross profit margin for MELCO CROWN ENTMT LTD is currently lower than what is desirable, coming in at 29.32%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.75% trails that of the industry average.

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