How to Trade 3 of 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.

Facebook


Nearest Resistance: $88
Nearest Support: $78
Catalyst: Upgrade

Social network Facebook  (FB) is enjoying a high-volume pop this afternoon, boosted 2.3% following an analyst upgrade from Piper Jaffray. Analyst Gene Munster hiked his price target on Facebook from $92 to $120, citing additional upside in the long-term value of the firm's Oculus virtual reality unit. Facebook acquired Oculus for approximately $2 billion last March.

Technically speaking, this stock is in a pretty clear-cut uptrend, bouncing on every test of support over the last ten months. Shares look like they're making a move to the top of their price channel this summer. Facebook is likely to remain a leader near-term.

For another technical take on Facebook, check out "Facebook Powers Past Heavy Resistance Toward All-Time Highs."

Alcoa

Nearest Resistance: $12
Nearest Support: N/A
Catalyst: Downgrade

Aluminum giant Aloca  (AA) is down 1.5% this afternoon, after being downgraded from buy to neutral at Sterne Agee.

The firm's 12-month price target of $12 is essentially where shares are trading today, but they're testing a key support level that, if violated, could send this stock considerably lower. If Alcoa confirms a break of $12 with today's close, then you don't want to own it in the intermediate-term.

Ambarella


Nearest Resistance: $130
Nearest Support: $80
Catalyst: Short Report

$3 billion semiconductor stock Ambarella  (AMBA) is down more than 17% on huge volume this afternoon after a negative report from short seller Citron Research put a price target of $60 on shares, arguing that shares were worth half as much as they traded for at the middle of last week. The weekend gave investors enough time to digest Friday's report fully -- and decide that, broadly speaking, they didn't want to own Ambarella any more.

From a technical standpoint, shares are re-entering the price channel that Ambarella had made a parabolic move from at the beginning of this month. That means that the uptrend isn't in jeopardy, but shares could move considerably lower (down to $80) before catching a bid again.

This article is commentary by an independent contributor. At the time of publication, the author was long Facebook.

More from Opinion

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks

Throwback Thursday: Tesla, Chip Stocks, TheStreet's Picks

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

Musk Goes on Unoriginal Media Tirade

Musk Goes on Unoriginal Media Tirade

What's Happening in Video Games This Week: On the Road to E3

What's Happening in Video Games This Week: On the Road to E3

Wednesday Wrap-Up: Let's Talk About General Electric

Wednesday Wrap-Up: Let's Talk About General Electric