7 Big Stocks to Trade for Big Gains

Here's a technical look at how to trade some of the most active stocks on the market right now.
By Jonas Elmerraji ,

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.

Micron Technology

  • Nearest Resistance: $14
  • Nearest Support: $13
  • Catalyst: Poison Pill

$14.5 billion tech stock Micron Technology (MU) - Get Report  is up almost 7% as I write this afternoon, pushing higher in reaction to the firm's adoption of a "poison pill" designed to avoid an ownership change for the firm. The board decision to give shareholders one right for each share of stock becomes active if a new stake of 4.99% or more gets acquired. The poison pill's stated purpose is to preserve Micron's valuable net operating loss carryforwards, and Wall Street clearly likes the news today.

From a technical standpoint, Micron actually looks excellent right now. Shares pushed off of their 2016 lows back in mid-May, and they're testing long-term resistance at $14 this week. As I write, shares are actually trading a few cents above the $14 level, but it's not enough of a move to be considered a breakout just yet. If Micron can materially bust through $14, we've got a buy signal in this big stock.

Advanced Micro Devices

  • Nearest Resistance: N/A
  • Nearest Support: $5.50
  • Catalyst: Analyst Upgrade

Advanced Micro Devices (AMD) - Get Report  is rallying hard for another session this afternoon, up more than 10% on big volume to start the week following Friday's solid second-quarter earnings numbers. AMD's quarterly results came with positive expectations for the third quarter, and an analyst upgrade from Exane BNP Paribas is helping to drive bullish sentiment for shares today.

Technically speaking, AMD is clearly in "breakout mode" right now. Shares pushed through resistance at $5.50 following earnings, and this stock is making fresh 52-week highs this afternoon. In the long run, the path has been cleared for AMD to continue its upside move. Nearer-term, expect a modest correction after the big push higher.

Sprint 

  • Nearest Resistance: $6
  • Nearest Support: $4.25
  • Catalyst: Q1 Earnings

Shares of mobile carrier Sprint (S) - Get Report are seeing a huge, big-volume move this afternoon, propelled by a first-quarter earnings release that signals a possible turnaround. Sprint added 180,000 new monthly subscribers during the quarter, stomping the 112,000 additions that Wall Street was expecting. Likewise, churn rates were the lowest in company history.

The flip side to that better-than-expected growth was a bigger-than-expected loss. Sprint was $302 million in the red in the first quarter, as it spent more to attract those new names.

Despite the losses, the turnaround story comes at a crucial time for Sprint. Investors have been speculating that the firm could have to resort to selling off its valuable airwave spectrum in order to stay afloat. But if Sprint can sustain the latest growth numbers, that sort of drastic action may not be necessary.

Sprint's chart is pretty easy to understand. This stock has been in an uptrend since the first week of January, and today's nearly 24% pop is shoving shares up to the high end of that price range. In short, Sprint has been a "buy-the-dips stock" for almost all of 2016, and that's still very much the case right now.

While patience does make sense with Sprint hovering near the top of its price channel, it makes sense to buy on weakness this summer.

Yahoo!

  • Nearest Resistance: $39
  • Nearest Support: $38
  • Catalyst: Verizon Acquisition

The Yahoo! (YHOO)  drama is finally coming to a close this week, following the announcement that Verizon Communications (VZ) - Get Report  had agreed to buy Yahoo's Web assets for $4.83 billion. Verizon will hand over cash for the assets, which include Yahoo!'s well-trafficked Web portals as well as real estate and some intellectual property. Yahoo! will retain its Alibaba Group (BABA) - Get Report  and Yahoo! Japan ownership, which is worth a combined $40 billion at current levels.

Once the deal closes, likely early in 2017, Yahoo! plans on changing its name and coming up with a strategy to return cash and other assets to shareholders. In the meantime, this former tech titan is trading for a hefty discount to its sum-of-the-parts valuation. That discount reflects a lot of the investor anxiety surrounding Yahoo and Verizon sealing the deal -- as well as some of the flummoxed attempts at returning shareholder value that have failed in the recent past.

Yahoo! has an important technical support level at $38, and shares are closing in on a test of that price floor this afternoon. A bounce off of that $38 level likely makes for a solid buying opportunity for traders who want to take advantage of the discount baked into shares of Yahoo! following the news.

Verizon Communications

  • Nearest Resistance: $56
  • Nearest Support: $55
  • Catalyst: Yahoo Acquisition

The other half of the Yahoo! deal is $230 billion telco Verizon Communications (VZ) - Get Report . The Yahoo! purchase adds another legacy Internet brand to Verizon's AOL purchase, which closed last summer. The purchase is a doubling down on content and mobile advertising for Verizon, and it comes at a lower sales multiple compared with last year's AOL purchase.

Even though Verizon is correcting on big volume this afternoon, the driver behind that is more technical than tied to the Yahoo! acquisition news. Verizon has been consolidating in an ascending triangle setup since the start of July, showing traders a price pattern that triggers a buy on a breakout above $56. Shares aren't quite there yet, but they're close -- the extremely tight trading range that Verizon has been stuck in all month long also means that the breakout is likely to happen very quickly.

If you're looking for another solid way to take advantage of the Yahoo!-Verizon deal dominating the news cycle this week, going long Verizon on a push through $56 is a high-probability trade here.

Ford Motor 

  • Nearest Resistance: $16
  • Nearest Support: $12.50
  • Catalyst: Technical Setup

Consistently high-volume blue chip Ford Motor (F) - Get Report  is seeing another active session today, as traders get positioned ahead of this stock's Thursday morning earnings release. Earnings make up part of the story, but they're not the whole story. A lot of today's volume (and relatively flat trading range) has to do with the fact that Ford is pressing up on a long-term resistance level at $14 this week.

$14 has been a price ceiling for Ford since last winter, and so far, shares have failed to catch a bid above that price line on the last four attempts through it. If Ford bulls can muster the strength to hold this stock back up above $14, we've got a clear-cut buy signal. At this point, investors should expect the possible breakout to coincide with earnings. Second-quarter numbers might be what's needed to rally buyers behind this automotive giant.

U.S. Oil Fund

  • Nearest Resistance: $11.50
  • Nearest Support: $10
  • Catalyst: Spot Oil Prices

Rounding out our list of the market's most active stocks is the U.S. Oil Fund (USO) - Get Report , a $3 billion ETF that tips the scales as most investors' go-to way to get exposure to oil prices. USO has been a strong performer in 2016, up almost 30% since oil prices bottomed in the first half of February. But that doesn't mean that it makes sense to buy USO at this point. Shares broke their uptrend when the calendar flipped to July, and this stock has been heading lower ever since.

At this point, $10 looks like the next potential price floor for USO on the way down. If this fund fails to catch a bid at that round-number support level, then shares are likely to hit $9 without stopping for a break. Some semblance of a correction is expected following a big rebound like the one we've seen in oil prices this year, but we're teetering on the fence between correction and crash this summer. If shares of USO fail to hit the brakes at $10, look out below.

Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

Loading ...