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.
- Nearest Resistance: $15
- Nearest Support: $11
- Catalyst: DOJ Settlement Rumors
Beleaguered German banking giant Deutsche Bank(DB) - Get Report is leading off our list of Wall Street's most-active stocks from last week, ending Friday on a high note thanks to rumors that the firm is closing in on a settlement with the Department of Justice. DB is reportedly on track to settle a probe into the firm's residential mortgage-backed securities issues for $5.4 billion, a payout that's significantly lower than most analysts were expecting. Deutsche Bank rallied double-digits during Friday's trading session as a result.
Technically, Deutsche Bank's rebound is a case of too little, too late. Shares are still holding onto their downtrend as we head into October, a price trajectory that would take a lot more than Friday's pop to reverse course. Investors should avoid DB until this troubled bank can set up some semblance of support. Meanwhile, the headline risks remain very elevated in this stock.
Could a Deutsche Bank collapse create a market meltdown the way that Lehman Brothers' failure did in 2008? Yes and no, writes Tom Graff of Real Money, our sister site for active traders. Click here to see what he means.
Cognizant Technology Solutions
- Nearest Resistance: $58.50
- Nearest Support: $47
- Catalyst: Probe
Cognizant Technology Solutions (CTSH) - Get Report spent Friday selling off, down more than 11% following news that the firm's president had resigned at the same time that Cognizant announced an internal probe into whether some of the firm's payments in India had violated the U.S. Foreign Corrupt Practices Act. Concerns over the departure of an executive who has been instrumental to Cognizant's long-term growth, as well as anxiety over the investigation combined to cause shares to plummet.
That said, Cognizant's price action hasn't exactly looked attractive heading into the fall months. Shares have been in a downtrend all year long, and Friday's big gap down doesn't necessarily change this stock's technical trajectory. Shares are still within their downtrending channel.
- Nearest Resistance: N/A
- Nearest Support: $94
- Catalyst: Buyout Rumors
NXP Semiconductors(NXPI) - Get Report rallied hard on Thursday and Friday, following rumors that the firm was a potential buyout target for mobile chipmaker Qualcomm(QCOM) - Get Report . Analysts see a potential $40 billion consolidation for Qualcomm and NXP, and investors are suddenly pricing in a high likelihood of a deal getting done.
From a technical standpoint, last week's big upside move in NXP looks attractive. That said, this stock's ability to keep that trajectory might find a ceiling if Qualcomm's offer price comes in close to where shares trade here. From a risk-management standpoint, it's not a bad idea to look at NXP with a little extra caution here; the headline risk is significant if the deal price comes in lower than expected, or falls through.
NXP is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. On Friday, Cramer and Research Director Jack Mohr wrote that NXP's "true value continues to be underappreciated by the market -- a takeover, at the right price, makes sense in order to achieve the greatest (well- earned) value for shareholders. We are in this for the long run, as always."
- Nearest Resistance: $72.50
- Nearest Support: $60
- Catalyst: NXP Buyout Rumors
Meanwhile, the other side of the NXP deal, Qualcomm(QCOM) - Get Report , is looking attractive here. Qualcomm also rallied hard on Thursday and Friday, adding about 8.3% to its market value as investors got excited about the prospect of a major acquisition.
Qualcomm has actually been in a well-defined uptrend since shares bottomed back in February, and it makes sense to buy the dips in shares this fall. That might require a little patience as the calendar flips to October, but that patience could pay off in a big way before 2016 is over.
- Nearest Resistance: $40.50
- Nearest Support: $39.85
- Catalyst: CFIUS Approval
Lexmark International (LXK) finished the week on a strong note Friday, rallying more than 13% during the session following news that the firm had received approval from the Committee on Foreign Investment in the U.S. (better known as CFIUS) to proceed with its acquisition deal to be bought by a consortium led by Apex Technology Co. The deal, if completed later this year as expected, would pay Lexmark shareholders $40.50 per share in cash.
Because of Friday's double-digit rally, the money has already been made on the Lexmark trade at this point. The 1.38% risk premium left in shares isn't worth pursuing at this point.
Financial Select Sector SPDR ETF
- Nearest Resistance: $20.25
- Nearest Support: $18.25
- Catalyst: Technical Setup
Friday's rebound in the broad market translated into a huge volume jump in the Financial Select Sector SPDR ETF(XLF) - Get Report , making it one of the most heavily traded issues on the NYSE to end the week.
The upside in XLF was largely technical. This exchange-traded fund has been in a well-defined uptrend for much of 2016, and with shares smack-dap in the middle of their trading channel last week, it provided investors with a high-volume consolidation. Long-term, XLF is a "buy the dips" ETF, but it still makes sense for this big ETF to retrace back to the bottom of its price channel before jumping onto the long side here.
Procter & Gamble
- Nearest Resistance: N/A
- Nearest Support: $89
- Catalyst: Exchange Results
Procter & Gamble(PG) - Get Report finished off last week on abnormally high volume, the result of an oversubscribed exchange offer that clears the way for the sale of the firm's beauty brands to Coty(COTY) - Get Report . The spinoff leaves P&G with a more focused list of categories, which management argues will both unlock value for shareholders and prevent the firm from spreading its growth efforts too thin.
The early indications look good for P&G shareholders. Procter is hitting 52-week highs on the heels of the preliminary exchange results.
Making new highs is significant from an investor psychology standpoint because it means that everyone who has bought shares in the last 52-weeks is sitting on gains. As a result, the "back to even" mentality is less of a concern than it would be for a name with a higher proportion of shareholders sitting on losses. This recent up move in momentum actually looks like a decent buying opportunity here for PG bulls.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.