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 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 seven of the most active stocks on the market.
- Nearest Resistance: $56
- Nearest Support: $49
- Catalyst: Cancer Drug Setback
Drug maker Bristol-Myers Squibb (BMY) - Get Reportis off more than 9% Friday, dragged lower by news that the firm won't seek accelerated approval for a combination of two drugs to treat newly diagnosed lung cancers. The announcement spurred an analyst downgrade from Cowen and Co. to market perform.
Technically speaking, Bristol-Myers Squibb's price action looks shaky here. Shares had broken out in mid-December, climbing higher before reversing course early in January. Today's selling brings BMY down to test prior support at $49, a level that if violated could trigger another wave of selling this winter. Investors should steer clear of BMY until shares can establish some semblance of support again.
Bank of America
- Nearest Resistance: $23
- Nearest Support: $22
- Catalyst: Technical Setup
Meanwhile, perennially high-volume banking giant Bank of America (BAC) - Get Reportis seeing another high-volume trading session to end this week, buoyed 1.4% higher by a technical setup that's on the verge of breaking higher in the sessions ahead.
Since December, BofA has been forming an ascending triangle pattern, a bullish continuation trade that triggers on a move through $23. Currently, Bank of America is 16 cents shy of that price level, which means that traders would be wise to keep a close eye on how shares finish the session today. BofA could be about to break higher.
- Nearest Resistance: $45.50
- Nearest Support: $43
- Catalyst: Analyst Downgrade
It's been an active week for railroad giant CSX (CSX) - Get Report. Shares popped hard Thursday following news that an activist effort is underway to boost efficiency at the rail transport company. Today, though, shares are giving some of that upside back following a downgrade from Deutsche Bank. DB had previously rated CSX a buy, but the firm cut its rating on the railroad to "Hold" this morning.
Technically, CSX remains attractive. Shares have been in a well-defined uptrend since last summer, and this week's breakout through the top of that price channel could be a new signal that the trend is about to accelerate. CSX bulls should wait for the selling to abate in this stock before adding to their positions in January.
- Nearest Resistance: $63
- Nearest Support: $59
- Catalyst: Bristol-Myers Squibb Setback
Schadenfreude is driving shares of drug maker Merck (MRK) - Get Reporthigher today, following the announcement that cancer immunology rival Bristol-Myers Squibb wouldn't seek accelerated approval for its lung cancer combo. Merck is up almost 4% this afternoon, as investors cross their fingers that the firm could see the upper hand as U.S. regulators review its own lung cancer combination immunotherapy.
From a technical standpoint, Merck's price action couldn't be more different than BMY's chart. Merck is forming a textbook example of an ascending triangle pattern, a bullish continuation setup that triggers a high-probability buy with a push through $63 resistance. Wait for MRK to push through and hold $63 before you buy this drug stock.
- Nearest Resistance: $8
- Nearest Support: $6
- Catalyst: Commodity Jump
Chesapeake Energy (CHK) - Get Reportis seeing a big volume session Friday, up 3.78% as oil prices rally to end the week. Chesapeake is also getting some extra volume attention from its pact to issue 18.8 million shares of stock in exchange for 151,000 preferred shares. While the transaction is accounting for some added volume this afternoon, higher oil is the big driver for the increase in CHK's share price.
Chesapeake has been trending higher in the long-term. Shares have been bouncing higher in a well-defined uptrend since last March, and that uptrend remains intact here. Put simply, Chesapeake remains a "buy the dips stock" for investors in 2017. Wait for shares to approach trendline support before you buy this stock.
U.S. Oil Fund
- Nearest Resistance: $12
- Nearest Support: $11
- Catalyst: Spot Oil
An even more direct way to play the increase in oil prices this afternoon is the U.S. Oil Fund (USO) - Get Report, an ETF that's become investors' favorite way to get exposure to the daily price action in crude oil prices. USO is up 2.5% as I write, climbing higher on big volume as energy investors bet on higher demand for oil under a Trump administration.
Long term, energy prices have actually been in an uptrend for the better part of the last year, and USO in particular becomes a high-probability trade with a push through resistance at $12, a price level that shares have been trying to take out since the end of the summer. If USO can break through $12 in January, we've got a buy signal in oil.
- Nearest Resistance: N/A
- Nearest Support: $80
- Catalyst: Q1 Earnings
Chipmaker Skyworks Solutions (SWKS) - Get Report is up 11% today on huge volume, popping following the firm's better-than-expected first quarter earnings numbers. Skyworks earned adjusted profits of $1.61 per share, beating the $1.58 in earnings that Wall Street was looking for, on average. Likewise, the firm upped its guidance, pointing to $1.40 per share in expected profits in the second quarter of 2017.
Skyworks is breaking out on earnings. Shares have been trying to push through resistance at $80 since October, and they finally managed to clear that hurdle with today's big gap higher. Wait for the buying frenzy to settle down if you're considering buying Skyworks here. The important thing is that it's not too late to buy shares at this point. The $80 breakout makes more upside the high-probability outcome in shares of this tech stock.
At the time of publication, author had no positions in the stocks mentioned.