What a way to start 2014! Gloom and doom have struck the stock market with a roughly 1,000-point decline in the Dow Jones Industrial Average.

#-ad_banner-#The Federal Reserve's dialing back of its massive bond buying program, emerging-market weakness and several economic indicators turning downward are some of the culprits of the heavy selling in the first month of the year.

While many supposed stock market experts and perma-bears are claiming that the selling is signaling much more downside to come, I wholeheartedly disagree. This selling is nothing more than simple profit-taking after the incredible bull market of 2013.

One very practical reason is that investors wanted to delay paying taxes on their capital gains. This caused many to wait until 2014 to take profits.

Another obvious reason is the fact that markets never travel in a straight line for long. There is always selling after a move higher, and this time that selling took longer, so it was more severe.

I am confident in the stock market and think this pullback is a great time to find bargains.

While many stocks sold off during January, a few bucked the downward trend. In fact, I located a stock that gained 8% in the first month of the year. Even more impressively, it soared over 350% between its Oct. 31 low and its late January high.

After a series of gap downs caused by negative news in October, shares plunged to the $2 area in November before steadily climbing higher to almost $10 in January. Shares have since pulled back to the $7 range where they appear to be forming a base that will make a great entry level.

The stock I am referencing is Ariad Pharmaceuticals (Nasdaq: ARIA). The company focuses on finding treatments for various forms of cancer.

It was all systems go for this successful company last fall as its share price hit $23 in September. Soon after this high, the FDA quashed the bullish fever by placing a partial hold on new patient enrollment for clinical trials of Iclusig. This drug targets abnormal tyrosine kinase in certain leukemias.

Since that time, the FDA decided to allow ARIA to resume marketing and commercial distribution of the drug due to a revision in U.S. prescribing information. In addition, the European Medicines Agency provided a positive opinion regarding keeping Iclusig on the market in the European Union. Not to mention, the company recently signed an agreement for distribution of Iclusig in Australia.

Finally, activist health care hedge fund Sarissa Capital Management has upped its holdings in ARIA to 11.5 million shares. This represents just over 6% of the outstanding shares. Sarissa is managed by Alex Denner, a Carl Icahn protegee.

Combine these factors with rumors of a potential takeover by a major pharmaceutical company, and it equals continued bullishness.

Taking a look at the technical picture, shares have dropped from the recent highs near $10 to the $7 range on profit-taking.

The Japanese candlestick chart printed a doji formation on Feb. 4. In candlestick charting, a doji represents indecision and often precedes a change of trend.

The technical picture combined with the fundamental happenings creates a very compelling bullish case right now.

Action to Take -->

-- Buy ARIA between $7 and $7.50
-- Set stop-loss at $5.87
-- Set initial price target at $13 for a potential 73% to 86% gain in 90 days

This article originally appeared on ProfitableTrading.com:
This $7 Biotech Stock Could Easily Double Again From Here

Related Articles
  1. Budgeting

    Plated Review, Is It Worth It?

    Take a closer look at the ready-to-cook meal service, Plated, and learn how the company can help you take the hassle out of home cooking.
  2. Investing News

    How China's Economy is Now Like America's

    China's economy could take the global economy down with it; why that might be good news in the grand scheme.
  3. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  4. Fundamental Analysis

    South Korea - King of Exports

    Read about one the most important and successful exporting countries in the world, and learn more about the types of products it exports.
  5. Investing News

    Volatility Vexed? See What the Experts Are Saying

    Volatile times lead to a diversity of opinions on where the market is headed. Here are takes from five investing luminaries.
  6. Investing Basics

    The January Barometer: Is it Still Relevant?

    The January Barometer has been historically accurate. Will that be the case in 2016?
  7. Investing News

    The 8 Highest Grossing Movies of 2015

    Count down the most popular films at the American box office in 2015, and learn how much they earned in the domestic and worldwide markets.
  8. Economics

    Why the Chinese Economy Impacts the U.S. So Much

    Here's how the Chinese economy, the second-largest in the world, impacts the United States.
  9. Investing News

    Why You Should Be Buying Stocks, Not Going to Cash

    Hedge fund managers are buying up the shares of big companies. What do the managers know that we don't?
  10. Economics

    Why Commodities Aren't to Blame for Market Malaise

    Commodities are taking the brunt of the blame for poor investment performance. Are they the real villain?
RELATED FAQS
  1. What is the long-term outlook of the metals and mining sector?

    An industry agency council was established by the World Economic Forum in 2014 to serve as an advisory board on the future ... Read Full Answer >>
  2. What is the railroads sector?

    The railroads sector is comprised of publicly traded stocks for companies that operate railroad tracks and/or trains. Railroad ... Read Full Answer >>
  3. Who are Amgen Inc.'s (AMGN) main competitors?

    Biotech giant Amgen Inc (AMGN) bills itself as one of the first biotechnology firms. It was founded in 1980 and has grown ... Read Full Answer >>
  4. What's the most expensive stock of all time?

    Back in late August 2012, Apple’s (AAPL) stock price reached nearly $700 per share. The stock has since split but has yet ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center