3 Hot Stocks to Trade (or Not)


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.

>>5 Hated Earnings Stocks You Should Love

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. Today, we'll leverage the power of the crowd to take a look at some of the most active stocks on the market today.

>>5 Stocks Ready for Breakouts

These "most active" names are the most heavily-traded names on the market -- and often, uber-active names have some sort of a technical or fundamental catalyst driving investors' attention on shares. That's especially true now that earnings season is officially underway. And when there's a big catalyst, there's often a trading opportunity.

Without further ado, heres a look at today's stocks.


Nearest Resistance: N/A
Nearest Support: $22.25
Catalyst: Earnings Beat

First up is small-cap drive-in restaurant chain Sonic (SONC), a name that's up almost 10% this afternoon on the heels of solid earnings numbers. The firm earned profits of 7 cents per share, a number that came in just over analysts' consensus expectation. After a long track record of earnings misses, today's earnings beat is enough to propel shares to new highs. And that, believe it or not, is creating a buying opportunity this week.

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 below SONC's support range.

Himax Technologies

Nearest Resistance: $13
Nearest Support: $8.50
Catalyst: Analyst Downgrade

Shares of small-cap chipmaker Himax Technologies (HIMX) are getting hammered lower this afternoon after news hit that analysts at Bank of America Merrill Lynch were downgrading this stock two full ratings down to underperform. Shares are off more than 15% as I write on the heels of the report.

Technically speaking, this chart is broken. Himax spent the last few months forming a broadening top pattern that finally broke through support at $13 today. That means that lower levels look likely in this stock. The next meaningful support level for shares comes in at $8.50, a price that's a full 25% lower than where shares sit now. I'd suggest staying away from the long-side in HIMX for the time being.

Gilead Sciences

Nearest Resistance: $79.63
Nearest Support: $70
Catalyst: Technical Setup

Gilead Sciences (GILD) is essentially flat on big volume this afternoon, a hangover of sorts from last week's big drop on Friday. News hit that lawmakers wanted to know why the firm's hepatitis C drug Sovaldi costs $1,000 per pill -- and the increased scrutiny on GILD's pricing was enough to make investors nervous. But it doesn't matter much. This chart was broken long before the letter from lawmakers went public.

GILD spent most of the last year in an uptrend, but that trend line broke at the start of March, sending shares lower. Now, the 50-day moving average is the resistance level to watch in GILD in the near-term. Until Gilead's newfound downtrend rights itself, it makes sense to stay away from the lower levels this stock is making.

To see these stocks in action, check out the at Most-Active Stocks portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.



Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in 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

More from Investing

A BJ's Wholesale IPO Is Logical Next Step

A BJ's Wholesale IPO Is Logical Next Step

Tesla Investor Pushing for More Board Changes

Tesla Investor Pushing for More Board Changes

What You Need to Know About Facebook and Europe's New Privacy Rules

What You Need to Know About Facebook and Europe's New Privacy Rules

8 Bold Moves General Motors Could Make to Rev Up Its Battered Stock Price

8 Bold Moves General Motors Could Make to Rev Up Its Battered Stock Price

Is Your Investment Portfolio Prepared for Trade Wars, Inflation and More Trump?

Is Your Investment Portfolio Prepared for Trade Wars, Inflation and More Trump?