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 and market data 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 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...
Bank of America Inc.
- Nearest Resistance: N/A
- Nearest Support: $24
- Catalyst: Rate Hike Speculation
$256 billion banking behemoth Bank of America Inc. (BAC) - Get Bank of America Corp Report is up more than 3.5% as I write this afternoon, charging higher on active trading volume as investors speculate about the increased possibility of a rate hike from the Fed. Higher rates mean higher net interest margins for banks - and a potential extension of the prolonged rally we've seen in the financial sector since last summer. Currently, BofA looks like one of the best-in-breed ways to play that trend.
From a technical standpoint, Bank of America has been rallying since June. Shares churned sideways in a textbook example of an ascending triangle pattern earlier this year, with a breakout taking place just last month. From here, look for additional upside now that Bank of America has taken out any conspicuous resistance levels overhead.
- Nearest Resistance: $30
- Nearest Support: $24
- Catalyst: Technical Setup
Wall Street favorite Micron Technology (MU) - Get Micron Technology, Inc. Reportis living up to its reputation as one of the NASDAQ's most actively-traded stocks again today. Micron is up 4.5% for technical reasons this afternoon, as shares bounce off of the bottom of their trend channel once again. That support bounce means that higher ground is still likely in shares of this $26 billion tech firm. More importantly, it's providing a clear-cut buy signal this afternoon for traders who haven't pulled the trigger on MU's uptrend yet. The 50-day moving average is a logical place to park a protective stop if you decide to buy Micron here.
iPath S&P 500 VIX Short-Term Futures ETN
- Nearest Resistance: N/A
- Nearest Support: N/A
- Catalyst: New S&P 500 Highs
The iPath S&P 500 VIX Short-Term Futures ETN (VXX) - Get iPath Series B S&P 500 VIX Short-Term Futures ETN Report is seeing elevated trading volume this afternoon - but not for the right reasons for anyone who owns this exchange traded note. The VIX Volatility Index correlates negatively with the S&P 500, and that means that, as the big stock market index hits new all-time highs this afternoon, VXX is plunging about 5%. The big trend in this ETN is hard to miss: as long as the big market indices keep on moving up and to the right, you don't want to own it.
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.
Utilities Select Sector SPDR ETF
- Nearest Resistance: $52
- Nearest Support: $50.50
- Catalyst: Rate Hike Odds
The Utilities Select Sector SPDR ETF (XLU) - Get Utilities Select Sector SPDR Fund Report is seeing abnormal trading volume this afternoon, as investors weigh the consequences of higher interest rates. XLU is down a little less than 1% this afternoon, as the prospect of a Fed rate hike translates into lower prices for high-yield stocks like utilities. The pause in XLU's price action today also coincides with an important technical level at $52, a price tag that acted like a ceiling for shares as recently as July. It's too early to say that this stock is about to correct again - meanwhile, a breakout above $52 would trigger an important technical buy signal in this popular ETF. Stay tuned.
Best Buy Co. Inc.
- Nearest Resistance: $44
- Nearest Support: $40
- Catalyst: Q4 Earnings
Electronics retailer Best Buy Co. Inc. (BBY) - Get Best Buy Co., Inc. Reportis getting attention from sellers this afternoon, backsliding on the heels of the firm's fourth-quarter earnings call. Adjusting for one-time charges, Best Buy saw Q4 profits of $1.95 per share, a number that came in above analysts' consensus bet of $1.67. Even so, Best Buy's spending plan and sales forecasts are spooking investors enough to make today a net loser. Best Buy's share price is down 4.2% as I write.
Best Buy has been a "buy the dips stock" since last June, but that's ending today. Shares violated trendline support with today's earnings-fueled gap lower, opening the potential for more downside risk from here. Until the selling pressure shakes out, this is a stock to avoid.
Palo Alto Networks
- Nearest Resistance: $125
- Nearest Support: $117.50
- Catalyst: Q2 Earnings
Cyber security stock Palo Alto Networks (PANW) - Get Palo Alto Networks, Inc. Report is in selloff mode today. Shares of the $10 billion stock are shedding more than 22% of their market value as I write, plunging on second-quarter earnings results. Earnings met expectations for the quarter, coming in at 63 cents per share excluding one-time items. Analysts had been expecting a 62-cent profit. But a cut to the firm's 2017 profit forecast is what's driving the share price lower this afternoon - and it means PANW is in "make-or-break mode".
Palo Alto Networks started today's session by selling off all the way down to a key prior support level at $117.50. That line in the sand acted as a floor for shares twice back in June, and it's holding up again this March. At least for now. If PANW violates $117.50, look out below.
Lowe's Companies Inc.
- Nearest Resistance: $82
- Nearest Support: $75
- Catalyst: Q4 Earnings
Home improvement retailer Lowe's Companies Inc. (LOW) - Get Lowe's Companies, Inc. Reportis rallying almost 10% as I write this afternoon, surging higher as the firm enjoys a major fourth quarter earnings tailwind from rising home prices. Lowe's earned 86 cents per share for the quarter, besting the 78.5-cent quarterly profit that analysts were expecting. The earnings reaction puts this stock within grabbing distance of all-time highs up at $83.65.
For now, the technical picture at Lowe's hasn't changed quite yet. Shares gapped significantly higher on earnings today, settling in at the top of a price channel that's been in place since November. That resistance level coincides with another price ceiling from last summer at $82. If LOW can crack that upside barrier, the path is clear to higher ground in March.
At the time of publication, author had no positions in the stocks mentioned.