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.
Bank of America
- Nearest Resistance: $13
- Nearest Support: $11
- Catalyst: Fed Minutes
Bank of America (BAC - Get Report) tipped the scales as the highest-volume stock on the NYSE yesterday, getting significant attention following the release of the Federal Reserve's meeting minutes from January. The Fed's concerns about tightening policies helped to spur upside in the financial sector -- including BofA's 2.5% rally Wednesday. That move puts this big bank's total returns at 12.5% in the last five trading sessions.
Despite the rebound in BofA, context matters here. This big banking stock may be bouncing higher, but that bounce is happening within a longer-term downtrend that started back in December. Shares are testing the top of that trend channel in today's session, but until BofA can catch a bid above $13, it makes sense to stay away from the long side of this big banking stock for now.
From a fundamental perspective, Bank of America is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. Cramer and co-portfolio-manager Jack Mohr recently said: "We expect continued volatility (this is why we have refused to buy into the stock's recent bout of wholesale selling), but do see deep value in the long term."
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U.S. Oil Fund
- Nearest Resistance: $9.50
- Nearest Support: $7.50
- Catalyst: Crude Oil Rebound
U.S. Oil Fund (USO - Get Report) is another big beneficiary of the commodity rebound this week. USO is retail investors' best investible proxy for crude oil prices -- and it's up almost 10% since Friday.
That said, the price trajectory isn't great in USO right now. Shares may be up in recent sessions, but this commodity pool's downtrend is very much intact as of this writing. In fact, USO could move as high as $9.50 without even testing the top of its downtrend. Until USO can start putting in some higher lows and highs, buyers should stay away from crude.
- Nearest Resistance: $4.50
- Nearest Support: $3
- Catalyst: Alibaba Investment
Groupon (GRPN - Get Report) got a major shot in the arm this week, when it was announced that Chinese e-commerce giant Alibaba Group (BABA - Get Report) had bought approximately 33 million shares of the daily deals site. That purchase means that Alibaba owns approximately 5.6% of Groupon -- and investors are viewing it as a major vote of confidence from one of the savviest tech companies on the market today.
Technically speaking, Groupon looked "toxic" as recently as Friday, when earnings failed to break shares free of their downtrending channel. But that changed with Tuesday's news-driven breakout. The move above the trading channel means that Groupon's breakout might just be for real -- and that yesterday's 7% drop just looks like a correction.
That said, it still makes sense to wait for shares to establish some semblance of support again before buying.
- Nearest Resistance: $11.50
- Nearest Support: $9.75
- Catalyst: Technical Setup
After a rough start to 2016, $13 billion computer storage stock Micron Technology (MU - Get Report) is starting to look "bottomy" -- and that's driving some big volume trading in Micron this week. Micron has spent the last few weeks trading in a tight trading range between $11.50 and $9.75. A breakout through the top of that range would signal a potentially longer-term move higher in Micron.
Don't be early on this trade; until buyers can push this stock back above $11.50, the downtrend remains intact.