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.
- Nearest Resistance: $315
- Nearest Support: $300
- Catalyst: Pfizer Merger
Drug company Allergan (AGN) - Get Report is seeing big volume this afternoon, after the firm wrapped up long-term talks with pharma giant Pfizer (PFE) - Get Report to combine in a reverse merger that values Allergan at $355 per share. The reverse takeover structure means that Pfizer will move its tax domicile to Ireland, a move that's come under considerable political scrutiny in the last year and change.
There's still considerable flux surrounding the Pfizer/Allergan merger right now. Shares of Allergan currently trade for a 16% discount to their deal value, indicating Wall Street's unease over the hurdles that the firms need to clear between now and closing the deal.
Technically, Allergan has upside potential once shares can break above $315 resistance. That said, headline risk is going to be huge surrounding this stock for the next year, making buying Allergan more like a lottery ticket than a high-probability trade.
- Nearest Resistance: $37
- Nearest Support: N/A
- Catalyst: Q3 Earnings
Video game retailer GameStop (GME) - Get Report is getting hammered lower this afternoon, down nearly 9% following the firm's third-quarter earnings call. GameStop earned Q3 adjusted profits of 54 cents per share, coming in short of the 59-cent best guess than analysts were looking for. Likewise, GameStop's fourth-quarter earnings forecast game in slightly below expectations.
While GameStop has been clawing higher over the course of the session, this stock's chart looks pretty ugly at this point. We're seeing the second major breakdown in shares since the beginning of November, with little in the way of downside support from here. Buyers should wait for this stock to carve out some semblance of support before looking for a bargain in shares of GameStop.
- Nearest Resistance: $48
- Nearest Support: $43
- Catalyst: Q4 2015 Earnings
Tyson Foods (TSN) - Get Report is seeing a 9% pop this afternoon, rallying following the firm's fiscal fourth-quarter earnings numbers. Tyson's upside is being driven by positive guidance today -- the firm expects that it will earn $3.50 to $3.65 per share in fiscal 2016, besting the $3.53 average estimate on Wall Street right now. That positive guidance is propelling shares to the top of their trend channel this afternoon.
Tyson has been a "buy-the-dips stock" all year long, bouncing higher on every successive test of the bottom of its uptrending channel that started back in the first quarter of this year. From here, it makes sense for opportunistic buyers to wait for another test of the bottom of that price range again before jumping into the Tyson trade.
- Nearest Resistance: $32
- Nearest Support: $25
- Catalyst: Technical Setup
Last up on our list of high-volume trades this afternoon is social media stock Twitter (TWTR) - Get Report , a name that's retracing on big volume this afternoon, following a test of key support at $25. That $25 level has been the important line in the sand from a risk-management standpoint, and a violation of $25 would mean that there's more downside risk ahead in Twitter.
On the flipside, it doesn't make sense to be a buyer until shares are able to catch a bid up above $32 resistance once again. The next few trading sessions could be pretty consequential for Twitter shareholders, particularly if that $25 price floor gets broken.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.