logo
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

Ariad Pharmaceuticals (ARIA) Plummets on Signs it's Overbought

By  +Follow January 27, 2014 8:25AM
Share:
Tickers Mentioned:

The buyout rumor giveth, the buyout rumor taketh away.

Shares in Ariad Pharmaceuticals (ARIA) dropped again on Monday, giving up much of the 11 percent gain from Friday. Ariad actually gapped up almost five percent to start the day before starting to plunge about 15 minutes after the markets opened, ultimately shifting to a loss of about 9 percent by early afternoon.

Rumored Buyout May Not Materialize

Potentially driving the loss was an article by TheStreet’s Adam Feuerstein that cited an anonymous institutional investor who was shorting the stock as saying that Friday’s buyout rumors were unfounded. "A takeover of Ariad by any Big Pharma would be career suicide for the business development guy proposing such a deal," this investor told Feuerstein. The investor also cited the potential for competition from Novartis’ (NVS) myeloid leukemia treatment that fills a similar role to Ariad’s Iclusig.

Technical Signs Indicate ARIA Overbought

However, the more-likely source of the plunge can be found in technical factors that would seem to indicate the stock was overbought. Since its dramatic October plunge after the FDA pulled Iclusig on blood clotting concerns, and several months of back-and-forth swings on very heavy volume, Ariad has been staging a strong rally that has placed it among the best performers in its industry of the last two months.

Ariad’s heavy daily volume would indicate that this small-cap company has become something of a battleground stock, and clearly one most traders are watching. And, as such, the more likely explanation for today’s sell-off can be seen in the stock’s relative strength index (RSI) crossing 70 this morning, a technical sign that traditionally indicates a stock is overbought.

The stock also flirted with an RSI of 70 twice in late December and earlier this month, with a sell-off following soon after on both occasions. Volume today was once again very high, clearing 70 million shares by 2:30pm. With a short float of close to 25 percent, it’s clear that Ariad remains a focal point for bullish and bearish traders alike.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


Liked What You Read? Join Equities.com and Connect With Your Favorite Financial Experts FOR FREE! Members of Equities.com gain access to our leading financial news and content, active social investment community, proprietary research tools including the 2014 Small-Cap Stars, E.V.A. reports and more.

				
				
By  +Follow January 27, 2014 8:25AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.