How to Trade the Market's Most Active Stocks

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.

SouFun Holdings


Nearest Resistance: $9
Nearest Support: $7
Catalyst: Technical Setup

Chinese internet stock SouFun Holdings (SFUN) is seeing a big-volume day for technical reasons this afternoon, with more than 6.5 million shares trading hands by midday. That's a huge chunk of SFUN's float, and volumes could be on the way even higher if shares can manage to breakout above nearby resistance at $9.

Long-term SFUN is forming an inverse head and shoulders setup, a bullish reversal pattern that triggers on a breakout above that $9 price ceiling. Shares are basically flirting with that breakout level this afternoon, but it's important to wait for $9 to get definitively taken out before diving into this trade. It's not a high-probability trade until then.

FireEye


Nearest Resistance: N/A
Nearest Support: $45
Catalyst: Security Rally

Internet security firm FireEye  (FEYE) is seeing another day of big-volume upside to start the week, buoyed by more details emerging on last week's announcement that hackers had breached computer systems at the U.S. Office of Personnel Management. This afternoon, President Obama is asking for Congressional support to combat cyber attacks, a trend that bodes well for security firms like FEYE. FireEye is hitting new highs this week as a result.

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. For traders who want to ride the bullish momentum, there's still time to build a position in FEYE now.


Opko Health


Nearest Resistance: $19
Nearest Support: $15
Catalyst: Acquisition Carryover

Finally, biopharma firm Opko Health  (OPK) is seeing a 5% rally this afternoon, a big bounce that's following last week's acquisition-related selloff. Last week, Opko announced that it was buying Bio-Reference Laboratories  (BRLI) for $1.5 billion, news that Wall Street reacted to by selling off shares. Today's bounce is an indication that the acquisition shock isn't sticking.

OPK is consolidating in between key resistance up at $19 and support at $15. That's a big range, but price action in shares of Opko has been extremely fast-paced over the course of 2015, and a correction has been overdue since the start of May. For investors who aren't risk-averse, this week looks like a good opportunity to build a position as shares move back towards prior highs.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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