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 supply and demand, so it can be valuable to see which 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.
So, today, we'll leverage the power of the crowd to take a look at some of the most active stocks on the market.
Brocade Communications Systems
- Nearest Resistance: $12.75
- Nearest Support: $12.23
- Catalyst: Acquisition
Leading off our list of today's most active stocks is mid-cap communications infrastructure technology stock Brocade Communications Systems (BRCD) . Brocade is up more than 10% this afternoon, following confirmation that the firm is being bought out by Broadcom (AVGO) - Get Reportin a deal that will pay Brocade shareholders $12.75 per share in cash.
Shares are up more than 40% since the first reports of the deal became public Monday.
From the technical standpoint, the money has already been made on the Brocade trade. Shares of Brocade are currently within 3% of their acquisition price, signaling that Wall Street sees a high likelihood of the deal getting closed.
Investors should look elsewhere for upside opportunities this month.
Nearest Resistance: $3.60
Nearest Support: N/A
Catalyst: Third-quarter earnings
Frontier lost 4 cents per share during the quarter, worse than the 3-cent loss that analysts were expecting. Likewise, revenue for the quarter came in lower than Wall Street's consensus guess.
Today's selloff is violating an important support line that's been in force for all of 2016.
Frontier has spent much of this year in a parabolic downtrend, an indication of the lack of demand for shares that's been haranguing this stock since it peaked back in late April. Now, Frontier is violating support at $3.60, a price floor that's been in place since its January lows. With $3.60 violated, Frontier stock is opening up considerable downside risk from here.
That means Frontier is a stock you don't want to own for the time being.
- Nearest Resistance: $30
- Nearest Support: $20
- Catalyst: Possible asset sale
Valeant Pharmaceuticals (VRX) is seeing a volatile week, following reports that the company may resort to asset sales to meet its obligations.
While shares initially popped on the news yesterday, Valeant is retreating today on reports that the company is in late-stage negotiations to sell Salix, the gastrointestinal drug business it paid $11.1 billion for just last year, to Takeda Pharmaceuticals.
The sale of one of Valeant's most attractive assets (at a probable billion-dollar loss no less) is spurring a high-volume 7% selloff today.
Long term, Valeant's chart looks pretty ugly here. Shares have been forming a descending triangle pattern for much of 2016, a bearish continuation setup that triggers a sell if $20 support gets violated. For now, shares are holding above that $20 line in the sand -- but they're close.
If Valeant materially violates $20, it's a sell.
iShares MSCI Emerging Markets ETF
- Nearest Resistance: $38
- Nearest Support: $36
- Catalyst: Technical setup
Things are looking attractive for the iShares MSCI Emerging Markets ETF (EEM) - Get Report. This popular way to gain exposure to emerging markets stocks is acting like a magnet for money in 2016, as it and other emerging market ETFs have drawn more than $25 billion in inflows over the last 22 weeks, according to Bloomberg data.
Technically speaking, there's good reason to like this security. The EEM ETF is currently forming an ascending triangle setup that triggers a buy signal on a breakout above $38. Shares are tightening around that $38 price ceiling here.
If EEM can materially close above that $38 level, we've got a fresh buy signal.
U.S. Oil Fund
- Nearest Resistance: $11.50
- Nearest Support: $10
- Catalyst: Crude oil prices
Another huge ETF that's drawing big investor attention this afternoon is the U.S. Oil Fund (USO) - Get Report. USO is the best investible proxy for crude oil prices -- so, no surprise, as crude sees a volatile month, USO is getting plenty of attention from market participants.
And even though oil prices have rolled over in the last month, this big fund actually looks pretty attractive here. USO is holding onto an uptrend that's propelled shares higher for the entire year, touching trendline support for a fifth time this week.
From here, a bounce higher off of support would be a strong, low-risk buy signal.
- Nearest Resistance: $0.90
- Nearest Support: $0.50
- Catalyst: Drug results
Shares of microcap pharma stock Palatin Technologies (PTN) - Get Reportare seeing huge trading volume this afternoon -- enough to make Palatin one of the most heavily traded issues on the NYSE -- following phase III results for its female libido drug bremelanotide.
Shares are up more than 21% this afternoon on enormous volume as the firm celebrates positive results -- though, as TheStreet's Adam Feuerstein points out, the phase III results are a little less bullish than the press releases would indicate.
Technically speaking, this stock is tracking higher in an uptrend that's reasonably well defined for a stock as thinly traded as Palatin is. And shares are sitting in the lower half of that uptrending channel here. That said, headline risk surrounding Palatin is likely to remain elevated in the near term.
Only the most risk-tolerant traders should try to buy the dips in this penny stock.
- Nearest Resistance: $12
- Nearest Support: $11.25
- Catalyst: October sales numbers
Finally, carmaker Ford Motor (F) - Get Report is down 1.5% on big volume this afternoon, swatted lower after the firm posted October sales that came in below expectations. Light vehicle sales dropped 12% in October, while Wall Street was only anticipating an 11% decrease in sales. Ford's sales numbers were a little skewed by particularly strong sales numbers last year, but the expectation miss is the big thing here.
From a technical standpoint, Ford's chart is a mess. Shares have been forming a falling wedge, trading in a tightening range that's pointed lower. A breakdown through $11.75 support within the wedge pattern adds some downside pressure to Ford's price action in November.
Put simply, until Ford can start establishing some higher lows, this isn't a stock you want to think about buying.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.