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: $60
- Nearest Support: $26
- Catalyst: Board Changes
Big changes are taking place at beleaguered pharma firm Valeant Pharmaceuticals (VRX) this week. The firm is kicking off its search for a new CEO and has also named hedge fund manager Bill Ackman to its board; Ackman's Pershing Square Capital Management owns a 9% stake in the drugmaker. The drama surrounding Valeant isn't over yet -- board member and former CFO Howard Schiller reportedly declined Valeant's request to resign from the board.
From a technical standpoint, even though Valeant is catching a bid here, this stock isn't out of the woods yet. Today's 13.5% bounce is a relatively tepid jump when weighed against the 85% free fall shares have experienced in the last year. Caveat emptor.
iShares MSCI Emerging Markets ETF
- Nearest Resistance: $36
- Nearest Support: $32
- Catalyst: Technical Setup
The iShares MSCI Emerging Markets ETF (EEM) - Get iShares MSCI Emerging Markets ETF Report is seeing some big attention this afternoon. The $22 billion exchange-traded fund is tipping the scales as one of the highest-volume issues on the NYSE as the week kicks off.
EEM's move today is largely technical. After a long stretch of underperformance, this popular ETF broke out above the top of its trend line at the beginning of March, and shares are finally starting to put in some higher lows. Now looks like as good a time as any to build a position in EEM -- just be sure to keep a tight stop loss in place in case shares re-enter their downtrend.
U.S. Oil Fund
- Nearest Resistance: $11
- Nearest Support: $10
- Catalyst: Technical Setup
EEM isn't the only big ETF that seeing huge trading volume today; another is the U.S. Oil Fund (USO) - Get United States Oil Fund LP Report . For all of 2016, USO has been carving out a long-term bottoming pattern, a move that triggered a buy signal with a close above $10. Now shares are starting on their next leg higher, testing this energy ETF's ability to clear its long-term downtrend, currently at $11.
If shares can trade above the dashed red line on the chart above, we've got a pretty clear buy signal in USO. It's a very smart idea to wait until shares can catch a bid above their downtrend before becoming a buyer.
- Nearest Resistance: $113
- Nearest Support: $100
- Catalyst: Acquisition Offer
Paint maker Valspar (VAL) - Get Valaris Ltd. Report exploded out the gate this morning, up more than 25% as of this writing following news that Sherwin-Williams (SHW) - Get Sherwin-Williams Company Report would pay $113 per share to buy its Minneapolis-based competitor. The acquisition price represents a 41% premium to Valspar's closing value on Friday, and there's still an 8% risk premium priced into shares of Valspar at this point.
While much of the money has already been made on the Valspar trade, there's still enough of a merger arbitrage opportunity that investors may want to give this $9 billion stock a closer look this spring.
Starwood Hotels & Resorts
Starwood Hotels & Resorts (HOT) is reclaiming the spotlight this week, after the firm announced that it had accepted an improved takeover offer from hotelier Marriott International (MAR) - Get Marriott International, Inc. Class A Report . An upped bid was largely expected from Marriott following last week's counter offer from a consortium of investors led by China's Anbang Insurance Group. Now Marriott will receive $21 in cash, plus 0.8 shares of Marriott for every share of Starwood held, bringing the total deal value to just over $79 at current price levels.
The technical picture doesn't matter much for Starwood at this point, particularly if the bidding war continues to escalate.
- Nearest Resistance: $15
- Nearest Support: $14
- Catalyst: Rejected Buyout Bid
Finally, Affymetrix (AFFX) is down 10% this afternoon, swatted lower after the firm reported that it was rejecting a $1.5 billion buyout offer from Origin Technologies, a shell company owned by some of Affymetrix's former employees. Instead, Affymetrix is going forward with a deal to sell itself to Thermo Fisher Scientific (TMO) - Get Thermo Fisher Scientific Inc. Report for $14 per share. The Origin deal would have paid out $16.10 per share.
Shares are currently trading above the Thermo Fisher deal's $14 price tag on hopes that shareholders could override the board's decision when they vote this week, potentially spurring a bidding war for Affymetrix in the process. Simply, put, the high-probability money has already been made on the Affymetrix trade at this point. Any additional upside is tied to headline risk from the merger deal.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long AAPL.