BALTIMORE (Stockpickr) -- 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 thats 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. With that in mind, today we're taking a look at some of the most active stocks on the market.
Nearest Resistance: $21
Nearest Support: $20.85
Jewelry stock Zale (ZLC) is up more than 40% in this afternoon's trading, after news hit that the small-cap firm was being acquired by Signet Jewelers (SIG) in a deal worth approximately $1.4 billion. That's an offer price of $21 per share for ZLC, a target price that currently leaves a tiny 0.52% risk premium left over in shares.
So even though ZLC gapped up hard on the news today, the technical story doesn't really matter any more in this trade. The money has already been made on the ZLC side of things -- and the 52 basis points left in shares really only leaves room for professional merger arbitrageurs, not retail investors.
Nearest Resistance: N/A
Nearest Support: $82
Catalyst: Zales Acquisition
But on the other side of the deal, in shares of Signet Jewelers (SIG), there's a trade to be made. Signet had been bouncing higher in a textbook uptrending channel for the better part of the last year, but shares broke out hard on news of the ZLC acquisition offer. The move was enough to shove SIG to new highs -- and that's a good thing from a momentum standpoint right now.
Making new highs is significant from an investor psychology standpoint because it means that everyone who has bought shares in the last year is sitting on gains. As a result, the "back to even" mentality is less of a concern than it would be for a name with a higher proportion of shareholders sitting on losses. If you decide to be a buyer here, I'd recommend keeping a tight stop in place.
Nearest Resistance: N/A
Nearest Support: $13.50
Catalyst: Earnings, Solar Project IPO
Semiconductor material and solar energy stock SunEdison (SUNE) is another breakout name to watch this week. Shares of SUNE are up on big volume this afternoon after earnings -- and news that the firm had filed a confidential S-1 for a solar project IPO. The public offering would unlock significant value for shareholders, boosting the value of the deal on SunEdison's books.
More importantly for traders, the SUNE deal is the catalyst for a breakout in shares today. SUNE had been forming an ascending triangle pattern with resistance at $15, but shares are confirming they can hold above $15 in today's session. Buy the breakout, but I'd suggest keeping a stop in place at the 50-day moving average.
Nearest Resistance: $80
Nearest Support: $70
Catalyst: Earnings Miss
Last up is SM Energy (SM), a name that's getting shellacked this afternoon following earnings that missed the mark for investors. SM reported earnings per share of $1.26, a number that's 18 cents shy of what Wall Street was expecting. The news also triggered downgrades from KeyBanc and BMO Capital Markets, adding to the pressure on shares today.
SM had been forming a topping setup, and today's 17% drop means that there's no question it's triggered. Still this stock's nearest support level is still a fair distance away at $70, so it makes sense to stay clear of the long-side until it can catch a bid again.
To see these stocks in action, check out the at Most-Active Stocks portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
At the time of publication, author had no positions in the stocks mentioned.
Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.
Follow Jonas on Twitter @JonasElmerraji