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: Layoff News
Bank of America (BAC) saw big volume to end the week last week, spurred by news that the firm is preparing for major layoffs in its investment banking and trading businesses. BofA is following other financial sector peers in cutting Wall Street jobs following poor performance from those units in the last several quarters, and investors are paying attention to the implications that those revenues could remain tamped down.
From a technical standpoint, shares of Bank of America have been under pressure year-to-date, with shares shedding almost a quarter of their market value in the first seven weeks of 2016. That said, BofA is starting to look "bottomy" in the intermediate term, bumping its head on resistance up at $13. If that $13 price level gets taken out, Bank of America could make up for lost time in March.
Bank of America is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. "While we view shares as undervalued on a long-term basis, we believe the stock represents a high risk/high reward situation," said Cramer and co-portfolio-manager Jack Mohr recently. They continued:
"We would caution investors interested in capital protection and risk avoidance to stay away from BAC shares as we expect the stock to continue trading in volatile fashion in the near to intermediate term. That said, for investors willing to brace for a volatile ride in the meantime, we expect the company will create value long term given its continued focus on cost efficiencies, evidence of effective risk management (which positions it to pass the Fed's stress tests in June), domestic presence, healthy loan/deposit growth and improved balance sheet as well as capital ratios. This should result in increased buybacks and dividends this year (we expect the company to double both capital deployment measures over the coming year)."
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- Nearest Resistance: $10
- Nearest Support: $8
- Catalyst: Q4 Earnings
Shares of department store chain J.C. Penney (JCP) saw a big move higher last week, rallying 31% on huge volume in the last five sessions thanks mainly to fourth-quarter earnings results. J.C. Penney earned a profit of 39 cents for the quarter, stomping the 21-cent estimates that investors were calling for, on average.
Penney gapped up hard Friday in reaction to the earnings results, closing the week within grabbing distance of long-term resistance up at $10, a price level not seen since last fall. If JCP can break out above $10, look out for the possibility of even more upside ahead.
- Nearest Resistance: $11
- Nearest Support: $10
- Catalyst: Q4 Earnings
$18 billion tech stock HP (HP) is another earnings season mover, up slightly in the last week on big trading volume. HP reported numbers that were in line with analysts' expectations for the fourth quarter, generating a profit of 36 cents per share. The firm's guidance was also in line with expectations, putting full-year 2016 EPS in a range between $1.59 and $1.69.
That lack of surprises should help HP get some traction in March. Shares broke out above prior resistance at $10, and they've been consolidating above that level in the sessions since. With earnings out of the way as a potential risk-inducer, HP is clear to move up and test the new top of its range at $11.
- Nearest Resistance: $30.50
- Nearest Support: $28.50
- Catalyst: Technical Setup
Last up on our list of big-volume stocks is Pfizer (PFE) . This $190 billion drug stock tested a key resistance level on Thursday and Friday, hovering just below that breakout range on big volume.
Pfizer has spent most of 2016 forming a rounding bottom, a bullish reversal pattern that looks just like it sounds. The buy signal comes on a push through resistance at $30.50. So far, Pfizer hasn't been able to sustain a bid above that price level, but if that changes next week, investors should consider it a buyable signal.