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…
SPDR S&P 500 ETF
- Nearest Resistance: $215
- Nearest Support: $210
- Catalyst: Market Decline
Leading off our list of the market's most active issues last week was the SPDR S&P 500 ETF(SPY) - Get Report . SPY saw big volume at the hands of Friday's 2.45% selloff in the S&P 500, the biggest one-day drop since the post-Brexit vote decline on June 24. That drop made SPY one of the highest-volume issues on the NYSE to end the week -- and it breaks the big index and ETF down from the tightest trading range in stock market history.
From a technical standpoint, SPY is down but now yet out. The big stock market index violated the bottom of its trading range at $215 during Friday's trading session, but shares are still holding the primary uptrend that's connected the lows so far in 2016. SPY needs to catch a bid at $210 to signal a buying opportunity this fall.
Advanced Micro Devices
- Nearest Resistance: $7
- Nearest Support: $5
- Catalyst: Offering
With the benefit of hindsight, the $1.2 billion in combined stock and convertible notes that Advanced Micro Devices(AMD) - Get Report filed for earlier in the week could have been better timed. AMD priced its offering in Friday's session, pricing the dilutive offering at $6 per share -- but the dilution came precisely as the S&P was suffering its worst selloff in months, exacerbating the downward drag of the deal.
So while AMD was holding onto its uptrend at the start of the week, that trend has been definitively violated as of Friday's close. On a longer-term timeframe, this could still just be a correction. AMD's rally has been explosive, and shares should stand to shed some overbought momentum. That said, it makes sense to avoid getting long AMD until the price action resolves itself with some higher lows.
Meanwhile, this is a stock to avoid in September.
iPath S&P 500 VIX Short-Term Futures ETN
- Nearest Resistance: N/A
- Nearest Support: N/A
- Catalyst: Market Decline
The corollary to the decline in the S&P on Friday was the iPath S&P 500 VIX Short-Term Futures ETN(VXX) - Get Report . VXX is one of the most popular ways for retail investors to get exposure to the VIX Volatility Index, a statistical measure that spiked Friday as volatility climbed, the S&P slumped, and investor anxiety soared. The market move was enough to make VXX one of the most actively-traded issues on the NYSE Friday. But while VXX climbed 16% during Friday's session, the overall trend is still pretty hard to miss right now. VXX has been a terrible bet for the last year.
An important note about this exchange-traded note is the fact that VXX doesn't have conventional support and resistance levels like a normal stock. Since the price action in VXX is determined by a statistical formula, not directly supply and demand from market participants, it's important not to try to use conventional technical tools on this unique exchange traded note. But as long as the uptrend in the S&P remains intact, you don't want to own VXX.
- Nearest Resistance: $9.75
- Nearest Support: $9
- Catalyst: Technical Setup
Alcoa started off on the wrong foot, selling lower in a well-defined downtrend at the same time that the S&P was stuck in its do-nothing trading range. But the lack of demand for Alcoa's shares really stood out Friday, as shares violated the bottom of that downtrend. From here, Alcoa needs to catch a bid at $9 support in order to avoid a more sustained downside move. $9 has been a price floor going all the way back to March. If it gets violated, look out below.
We added to our Alcoa position ... on extreme weakness. We want to make it clear that the Alcoa investment thesis is high risk, high reward. To quote from a recent recap, "With shares still trading above our cost basis, we would await a further pullback before adding in, although we believe the near-term direction of aluminum prices is increasingly less relevant to the valuation in light of the company's announced split into core Alcoa (commodity play) and its value-add business, Arconic, which sells to diversified end markets and customers. We remind members that Alcoa is a true value name, and only suitable for investors with a higher risk tolerance and longer time horizon." Aluminum prices have been barreling downward for the past month, which hurts Alcoa's core downstream business, but lifts profitability within the company's value-add business considering its main input cost is aluminum. This creates something of a hedge. As we stated in our roundup two weeks back, "We expect volatility in the near term, given the frequent movements in aluminum prices and arbitrageurs and traders attempting to play the separation."
- Nearest Resistance: $41
- Nearest Support: $37.50
- Catalyst: Technical Setup
But market-watchers aren't talking about the technical component of Friday's selloff in AT&T. This stock actually violated a long-term technical support level at the open on Friday, spurring shares to sell off more than 3% from that level over the course of the trading session. From here, with AT&T's uptrend broken, it makes sense to avoid this telco giant until further notice.
- Nearest Resistance: $51
- Nearest Support: $48.50
- Catalyst: Fines
Wells Fargo(WFC) - Get Report was a notable loser on Friday, selling off 2.36% on big volume thanks to news that the company was fined $185 million for opening millions of new accounts without customers' permission. So while most of WFC's banking peers managed to hold their ground on hopes that rate hikes could fuel higher net interest margins, this $246 billion banking stock dropped hard.
The good news for Wells Fargo shareholders is that, while this stock is down, it's not out. At least not yet. Wells Fargo is holding onto its uptrend from this summer's lows, a price floor that shares settled slightly above by Friday's closing bell. From here, Wells Fargo bulls should wait for a bounce off of support at $48.50 as a buying opportunity.
On Thursday, the bank was hit with a $185 million fine linked to widespread illegal sales practices that dealt largely with the cross-selling of products to unsuspecting customers. Ultimately, we view this as a suboptimal situation involving many ill-advised decisions that have subsequently tarnished Wells' brand as the "good bank." That being said, we appreciate management's honesty in issuing a clear apology and accepting responsibility for the situation. While this is clearly unfortunate timing for a stock desperately in need of a catalyst, we still view WFC as a solid long-term investment that looks to benefit from an upcoming interest rate hike by the Federal Reserve.
- Nearest Resistance: $6.25
- Nearest Support: $4
- Catalyst: Technical Setup, Commodity Selloff
Small-cap oil and gas services provider Noble(NE) - Get Report was another casualty of the commodity rout on Friday, selling off more than 10% as the sinking tide of the energy sector dragged contract drillers like Noble even further into the red.
From a technical standpoint, Noble's chart has looked ugly all year long, so it's not totally surprising that there was a lack of demand for shares to catch the selling last week. With that in mind, this is a name to avoid right now. The fact that a small-cap like Noble could be one of the most heavily traded issues on the NYSE Friday signals that there are lots of sellers out there at these lower price levels.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.