How to Trade 4 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.

Office Depot


Nearest Resistance: $9¿
Nearest Support: $8.80¿
Catalyst: Merger Concerns

Shares of office supply stock Office Depot  (ODP) took a 2.4% hit yesterday, swatted lower on news that a judge had granted the Federal Trade Commission's request to halt Sysco's  (SYY) planned acquisition of US Foods. While Office Depot doesn't have much overlap with the food supply business, investors are hand-wringing over the possibility that the FTC will make similar moves towards the firm's $6 billion acquisition by Staples  (SPLS), announced back in February.

While shares are still trading in a pretty tight range right now, some extra risk premium got squeezed into the deal with the possibility of a block from the FTC. Right now, there's a 20% risk premium baked into shares of Office Depot, enough to make betting on the merger closing a lucrative outcome if all goes well.

Staples


Nearest Resistance: $16.50¿
Nearest Support: $15.75¿
Catalyst: Merger Concerns

The other side of the Office Depot trade is Staples  (SPLS), which shed almost 4% yesterday on concerns that the FTC could block the planned acquisition deal.

Technically speaking, Staples is down but not out. Shares ultimately held long-term support at $15.75, a good sign that buyers are still in this stock. As long as shares can hold that level through the end of the week, it could become a decent buying opportunity.

That said, if $15.75 gets broken in Staples, then look out below.

AT&T

Nearest Resistance: $36¿
Nearest Support: $35.25¿
Catalyst: Analyst Upgrade

AT&T  (T) is looking buoyant this week, following a pair of analyst upgrades from Barclays and UBS on Tuesday ahead of the firm's planned closing of its long-awaited DirecTV  (DTV) acquisition. The move shoved shares above resistance at $35.25, clearing the way for a more meaningful move.

Even though AT&T corrected a few points in Wednesday's session, the breakout is pretty clear-cut and AT&T looks pretty attractive from a risk/reward standpoint here. If you decide to be a buyer in AT&T, consider parking a protective stop on the other side of the 50-day moving average.

Peabody Energy


Nearest Resistance: $2.75¿
Nearest Support: $2.30¿
Catalyst: California Pension Fund Bill

Shares of long-suffering coal stock Peabody Energy  (BTU) saw a 9% decline on big volume yesterday, following news that a bill that would require California's state pension funds to sell any investments in coal miners passed a committee vote in the state assembly. If made law, the bill would force funds -- including Peabody shareholder CalPERS, the largest public pension fund in the U.S. -- to exit their holdings in coal miners.

California pension holders probably wish that the bill passed about a year ago. After all, Peabody Energy has shed about 85% of its market value over those tailing 12 months. The parabolic downtrend is very much intact on this chart. Investors should be ready for a re-test of weak support down at $2.30.

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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