How to Trade the Market's Most-Active Stocks: RAD, ANR, AZO

 

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.

Rite Aid

Nearest Resistance: $6
Nearest Support: $5
Catalyst: Technical Setup

Drugstore chain Rite Aid (RAD) is selling off again today after a big violation of former support at $6 following the firm's second quarter earnings call. Shares had been forming a long-term head and shoulders top since the first quarter of this year, and earnings were enough to shove RAD below that key breakdown level.

There's a reasonable support level at $5 here, but given the size of the breakdown, it looks like $4.50 is likely to get tested from here. Patience is a virtue for investors looking for a buying opportunity in RAD.

Alpha Natural Resources

Nearest Resistance: $3.55
Nearest Support: N/A
Catalyst: Materials Sector Selloff

Alpha Natural Resources (ANR) is getting shellacked this afternoon, selling off alongside the rest of the materials sector as commodity prices broadly sell off. As a coal producer ANR is basically a leveraged bet on coal prices, so, today's price action in spot coal is having a worse effect in this stock's share price. Shares are down 8% as I write this afternoon.

From a technical standpoint, ANR's chart has been broken for a while. Shares have been bouncing their way lower in a downtrending channel for the last year and change, and the rebound in August was just a correction back to trend line resistance. Put simply, the outsized downside risk in this stock isn't a big surprise right now -- and it makes sense to stay away from the long side as long as ANR stays below its upper trend line.

AutoZone

Nearest Resistance: $545
Nearest Support: $510
Catalyst: Q4 2014 Earnings

Last up is AutoZone (AZO) , the $16 billion car parts retailer. AutoZone is down 4.6% this afternoon following the results of the firm's fourth quarter earnings call. AZO earned $11.28 per share for the quarter, slightly edging out analysts' consensus guess of $11.26. But comparable store sales missed estimates by a much bigger margin, triggering growth concerns among investors.

Today's big drop is sending AZO down to test key support at $510. Shares are hovering just below that long-term support level as I write, potentially signaling a breakdown after a sideways consolidation that's lasted all year long. If that $510 price tag gets violated today, then look out below.

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

-- Written by Jonas Elmerraji in Baltimore.

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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

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