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 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 today.
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. And when there's a big catalyst, there's often a trading opportunity.
Without further ado, here's a look at today's stocks.
Nearest Resistance: $1.40
Nearest Support: $1
Catalyst: Management Drama
The management drama at American Apparel (APP) is keeping the micro=cap in the headlines -- and on the list of most-active names -- for another week. The latest bombshell came in the form of yesterday's news that investor Standard General would hand over $25 million for American Apparel to cover called loans in exchange for, among other things, three board seats at APP. There's still significant event risk in this stock right now, but the technicals have at least turned favorable since their breakout at the start of this month.
With APP squarely above $1 again, there's reasonably good support in place as investors stake bets on a turnaround effort. Upside looks likely from here, but longs would be wise to keep their stops tight.
Fifth Street Finance
Nearest Resistance: $10
Nearest Support: $9.50
Catalyst: Secondary Offering
Shares of Fifth Street Finance (FSC) are down 3% this afternoon, following the pricing of a secondary offering of 13.25 million shares. The $9.95 price tag on the offering represents a discount on FSC, and share dilution is accounting for the rest of the drop. The offering comes just as FSC was testing new 52-week highs, and it's batting shares back down to retest support at $9.50.
Frankly, there's no good reason to be a buyer of FSC right now. Upside momentum got broken by today's offering update, and lower ground looks likely until shares can establish some semblance of support again. Traders will need to wait for that to happen before a low-risk entry point presents itself again.
Nearest Resistance: N/A
Nearest Support: $62
Catalyst: Takeover Talks
Lorillard (LO) is up close to 4% this afternoon, following the announcement that it was in talks with fellow cigarette maker Reynolds American (RAI) as a potential acquisition target. If Reynolds goes through with purchasing Lorillard, the combination could add significant economies of scale that make the firm more competitive with larger rival Altria (MO). LO's chart still looks orderly despite the announcement, meaning that there could be more upside room to rally as Lorillard hits new highs.
New highs are significant from an investor psychology standpoint because they mean 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 buy here, keep a tight stop in place.
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 names 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