3 Big Stocks to Avoid Like the Plague
Put down the 10-K filings and the stock screeners. It's time to take a break from the traditional methods of generating investment ideas. Instead, let the crowd do it for you.
From hedge funds to individual investors, scores of market participants are turning to social media to figure out which stocks are worth watching. It's a concept that's known as "crowdsourcing," and it uses the masses to identify emerging trends in the market.
Crowdsourcing has long been a popular tool for the advertising industry, but it also makes a lot of sense as an investment tool. After all, the market is completely driven by the supply and demand, so it can be valuable to see what names are trending among the crowd.
While some fund managers are already trying to leverage social media resources like Twitter to find algorithmic trading opportunities, for most investors, crowdsourcing works best as a starting point for investors who want a starting point in their analysis.
Today, we'll leverage the power of the crowd to take a look at some of the most active stocks on the market.
SunEdison
- Nearest Resistance: $7.40
- Nearest Support: N/A
- Catalyst: Analyst Report
After yesterday's huge 34% selloff in SunEdison (SUNE) , shares of this solar stock are rebounding nearly 7% this afternoon on an analyst report. Deutsche Bank's Vishal Shah reported that liquidity concerns at SunEdison are exaggerated, suggesting that a loan refinance could be an upside catalyst for shares. While today's rebound is certainly welcomed by shareholders, it's a blip on the radar compared to the freefall shares have experienced since the beginning of this month.
Technically speaking, this chart is still broken. The violation of support at $7.40 was a big red flag when we looked at this stock a week ago, and shares have yet to establish any semblance of a meaningful support level at this point. Avoid the temptation to find a bargain in SunEdison until that changes.
Target
- Nearest Resistance: $77
- Nearest Support: $68
- Catalyst: Q3 Earnings
Retail giant Target (TGT) - Get Report is off by 4% on huge volume today, down following the firm's third-quarter earnings release this morning. Target reported third quarter profits of 86 cents per share, a number that's right in line with analyst expectations. But a slowdown in online sales growth is spooking investors in this large-cap retailer, spurring the selling in shares.
From a technical standpoint, Target hasn't looked attractive all year long. Shares have been in a well-defined downtrend since the start of the summer, bouncing their way lower on every successive test of the top of that price channel -- and Target's selling today is following that same pattern as shares test trend line support. Buyers should avoid this stock until shares can catch a bid above the top of that trend channel, a move that isn't happening any time soon.
GoPro
- Nearest Resistance: $24
- Nearest Support: N/A
- Catalyst: Analyst Downgrade
Action camera maker GoPro (GPRO) - Get Report is shedding 7% of its market value this afternoon, swatted lower following a cut from Piper Jaffray that puts the firm's price target at $15, the lowest price outlook among major Wall Street firms right now. The analyst report cites concerns about big GoPro sales impacting profit margins as the reason behind the cut.
Technically, GoPro's path to $15 has less to do with margins than it does with a clear lack of buying pressure in this stock since early August. Shares have been unwinding in a steep downtrend this fall, and today's decline is just the latest in a series. More downside looks like the probable outcome for GoPro in the near-term.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.