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.
Without further ado, here's a look at today's stocks.
Nearest Resistance: $7
Nearest Support: $6
Catalyst: Greenlight Capital Selling
Drugstore chain Rite Aid (RAD) saw a big-volume drop yesterday, tumbling more than 5% by the close. The catalyst was an announcement from activist investor David Einhorn's hedge fund, Greenlight Capital, that the firm had sold its 6.6 million-share position in the last quarter. Einhorn was a high-profile proponent of Rite Aid when times were tough, and the sell is being seen as a big red flag.
From a technical standpoint, that doesn't look far off. Shares broke through key support at $7 on the Greenlight sell, and that puts shares on a collision course with their next-nearest support level at $6. It makes sense to avoid RAD until shares can catch a bid again.
Nearest Resistance: $34
Nearest Support: $32
Catalyst: Technical Setup, Debt Issuance
$34 billion computer storage stock Micron Technology (MU) has been the momentum darling of the last year and change, rallying more than 47% just since the calendar flipped to January. That changed yesterday, when shares sold off more than 4%, the result of a technical setup and added attention on the firm's $1.15 billion debt issuance from last week. Now MU is testing a key support level this morning at $32.
Shares of Micron have looked "toppy" for the entire month of July, and a break of $32 would be the signal that lower ground is likely. That doesn't mean that it's time to run for the hills in MU. The small size of the pattern in shares indicates a correction over a crash. Wait for support to get established again before you try to buy the dips in MU.
Nearest Resistance: $17.50
Nearest Support: $16.50
Catalyst: Bridge Loan
Alcoa (AA) added 2.7% to its share price on big volume yesterday, following news that the firm had obtained a commitment for $2.5 billion in bridge loan funding for its acquisition in Firth Rixon. The news pulls some of the uncertainty out of the deal, and it's helping to propel AA back up to retest the new highs set earlier this month.
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.
For another take on Alcoa, check out "5 Stocks Insiders Love Right Now."
El Pollo Loco
Nearest Resistance: N/A
Nearest Support: $32
Catalyst: IPO Excitement
Small-cap restaurant chain El Pollo Loco (LOCO) gained 43.5% in yesterday's session, the stock's second session as a publicly traded name. The California-based restaurant chain is up more than 83% since its first print on Friday, an indication that buyers are still willing to make bets on speculative opportunities in this market.
While the trading history in LOCO is short, the intraday chart shows a setup that's probably the most orderly buying frenzy I've ever seen. There are some big risks in LOCO right now, but the uptrend in shares looks very tradable for more savvy investors.
To see these stocks in action, check out the at Most-Active Stocks portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.