Updated with additional comments from Jim Cramer and Jack Mohr.
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.
Bank of America
- Nearest Resistance: $15.50
- Nearest Support: N/A
- Catalyst: Technical Setup, Sympathy Move
Up first on the list today is Bank of America (BAC) - Get Report . BofA is backsliding 2.7% this afternoon, seeing some of the highest volume on the NYSE thanks to the combination of a bearish technical setup and a sympathy move. The latter is a result of Citigroup's (C) - Get Report soft revenue numbers -- Citi itself is down more than 5.4% as I write -- but Bank of America is the higher-volume stock, and investors are concerned that Citi's black clouds could spread to peers as well.
Technically speaking, Bank of America's chart looks pretty ugly right now. Shares broke through a key support level at $15.50 earlier in the month, and they've been selling off ever since. At this point, it's a good idea to steer clear of BofA until shares can catch some semblance of a bid again.
From a fundamental perspective, Bank of America is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. Cramer and co-portfolio-manager Jack Mohr wrote recently that "the bank has multiple levers to draw upon in 2016, mainly further cost efficiencies, loan growth and increased capital flexibility as regulatory pressures ease."
"What makes Bank of America intriguing -- beyond its 10% discount to tangible book value -- is that it is the only large-cap bank left that is in the early innings of its growth story," Cramer and Mohr say.
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VelocityShares 3x Long Crude ETN
- Nearest Resistance: $7.50
- Nearest Support: N/A
- Catalyst: Oil Drop
Investors are making some big speculative bets on oil prices this winter -- and they're turning to leveraged ETFs and ETNs as a way to get exposure to price moves in that commodity market. That's the reason why the VelocityShares 3x Long Crude ETN (UWTI) is another of the highest-volume issues on the NYSE this afternoon.
Not surprisingly, this exchange-traded note has been in free fall lately, shedding value as oil prices plummet. Even worse, because it's triple-leveraged, it's been getting three times the downside (or usually worse).
UWTI is the definition of a falling knife right now. Don't try to grab onto it.
- Nearest Resistance: $32
- Nearest Support: $28
- Catalyst: Q4 Earnings
Shares of Intel (INTC) - Get Report are plunging this afternoon, down almost 9% as I write, following fourth-quarter earnings. Intel actually beat estimates, raking in profits of 74 cents per share for the quarter. Analysts had expected Intel to earn just 63 cents in the quarter.
The outlook, however, didn't look so hot. Intel expects to see first-quarter gross margins slide lower than Wall Street expected, and investors fear the possibility of a prolonged margin squeeze.
The technical setup bears some of the blame for Intel's big drop today. For the last few months, shares have been forming a bearish head and shoulders top -- and it's triggering with today's violation of its neckline at $32. That just opened up a whole lot of downside risk in this big chipmaker. Caveat emptor.
iShares China Large-Cap ETF
- Nearest Resistance: $33
- Nearest Support: N/A
- Catalyst: China Rout
China has been a major driver for 2016's negative market action here at home, so it's not surprising that the iShares China Large-Cap ETF (FXI) - Get Report is getting hit even harder. Since the start of January, FXI is down nearly 16%, just about double the drop in the S&P.
Shares had been forming a head and shoulders pattern for the last five months or so, triggering a sell at the start of 2016 once this pattern's neckline at $33 got busted. The price pattern in FXI isn't exactly "textbook," but it's certainly been tradable. Avoid the temptation to try to pick a bottom in FXI right now; this China ETF is likely to continue to sell off in the near-term.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.