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.
iPath S&P 500 VIX Short-Term Futures ETN
- Nearest Resistance: N/A
- Nearest Support: N/A
- Catalyst: Market "Correction"
Leading things off on our list of heavily-traded stocks is the iPath S&P 500 Short-Term Futures ETN (VXX) . VXX tracks the movement of the VIX Volatility Index, which has been in free fall as the S&P 500 pushed its way to new all-time highs last week. While VXX is likely to kick higher in the week ahead thanks to the news of a military coup in Turkey (which hit after Friday's closing bell in the U.S.), the general trend lower for VXX is pretty hard to miss here.
An important note about this exchange-traded note is the fact that VXX doesn't have conventional support and resistance levels like a normal stock. Since the price action in VXX is determined by a statistical formula, not directly supply and demand from market participants, it's important not to try to use conventional technical tools on this unique exchange traded note. But, as long as the uptrend in the S&P remains intact, you don't want to own VXX.
iShares MSCI Japan ETF
- Nearest Resistance: $12
- Nearest Support: $11.40
- Catalyst: Technical Setup
The iShares MSCI Japan ETF (EWJ - Get Report) is another exchange-traded product that reached the top of the NYSE's most-traded list to end last week. For EWJ, the big driver behind last week's volume was technical. EWJ has been "coiling" for much of 2016, bouncing within a pair of converging trendlines that have been tightening on this fund.
That tightening price action is going to resolve one way or the other -- but it's anybody's guess which way will win out until shares actually break one of their trendlines. The breakout is likely to happen fast in EWJ. Volatility is cyclical, and the recent tamping down of volatility on this price chart is likely to be followed up by a spike this summer.
- Nearest Resistance: $9
- Nearest Support: $6.80
- Catalyst: Analyst Note
Rite Aid (RAD - Get Report) ended last week jumping nearly 2.5% on big volume, after an analyst note put a 65% chance of approval on the firm's pending acquisition by Walgreens Boots Alliance (WBA - Get Report) . Walgreens is also reportedly talking to the FTC about the amount of asset sales they'd need to complete to get regulatory approval. Currently, investors are pricing in a 25% discount to WBA's $9 cash offer price, a price that currently implies just a 35% probability that the deal gets done, according to data from Bloomberg. That's potentially leaving a lot of money on the table for Rite Aid bulls right now.
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Technically speaking, Rite Aid has a clear path to move toward prior resistance up at $8.20. Still, that former price ceiling still leaves quite a bit of upside room to shares' $9 offer price. There's still quite a bit of regulatory risk surrounding the Rite Aid deal, but it's starting to look a lot more attractive for investors who can stomach the volatility.
- Nearest Resistance: $72.50
- Nearest Support: $62.50
- Catalyst: FTC Settlement
Shares of controversial company Herbalife (HLF - Get Report) shot 10% higher on Friday, rallying following the announcement that the company had come to a settlement with the FTC over the pyramid scheme allegations that came to prominence behind short seller Bill Ackman. Herbalife will pay a $200 million fine for its claims that people could become rich by distributing Herbalife products -- but the FTC isn't alleging that the $6 billion nutrition stock is a pyramid scheme. The relatively favorable conclusion for HLF bulls (including Carl Icahn) proved to be enough to push shares double-digits on Friday to new 52-week highs.
From a technical standpoint, the breakout to new highs is a major positive for Herbalife, clearing the way for a potentially longer-term move higher in the second half of 2016. Shares faded over the course of Friday's session, moving to the lower half of their daily range by the closing bell. In part, that means it's not too late for investors to buy the breakout in HLF.
- Nearest Resistance: $18.50
- Nearest Support: $16.80
- Catalyst: Guidance Cut
Indian IT consulting firm Infosys (INFY - Get Report) ended last week on a sour note, selling off nearly 9% following a cut to the firm's sales guidance for fiscal 2017. The firm sees its sales in dollars likely to grow 10.8% to 12.3%, below the 11.8% to 13.8% growth target that the firm had previously projected for the year. That trimmed expectation drove the selloff last week.
Infosys' selloff hasn't changed this stock's technical trajectory. Shares have been stuck in a well-defined downtrend since the middle of April, and while Friday's drop send shares back down to the bottom of their channel, they didn't violate support. That doesn't change the big picture, however. With INFY trading in a downtrend, lower levels still look likely ahead for this stock.
- Nearest Resistance: $9.25
- Nearest Support: $8
- Catalyst: Repurchase Plan
$12 billion banking stock Regions Financial (RF - Get Report) saw a shot in the arm last week, ending higher on big volume in part thanks to board approval of the firm's $640 million stock repurchase plan. That approval represents about 5% of Regions' total market capitalization today, a material chunk of the firm's value that's being returned to shareholders.
The technicals are telling an important story too in Regions right now. This stock is reversing higher after triggering a drop with a textbook head and shoulders top pattern last month. If shares can catch a meaningful bid above their $9.25 neckline level, look for Regions to re-test prior highs. Otherwise, if this stock bounces off that blue line in the week ahead, another test of $8 becomes more likely.
- Nearest Resistance: $121
- Nearest Support: $110
- Catalyst: Technical Setup
Last on our list of high-volume stocks from last week is $335 billion social media giant Facebook (FB - Get Report) . Facebook's price action has been pretty easy to understand in the long-term: Shares have spent the last year and change bouncing their way higher in a well-defined uptrending channel. The most recent test of the bottom of the channel came back in late June -- and shares are making another attempt toward the top of their price range this month. Now looks like a good time to build a position in Facebook from a risk/reward standpoint; just be sure to park a protective stop on the other side of the 200-day moving average.
Facebook is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. In their weekly roundup on Friday, Cramer and Research Director Jack Mohr addressed "comments from Andrew Left of Citron Research, the short-selling firm, on his belief that FB had reached too high of a valuation":
Facebook is not only a Goliath in its industry, but in the early innings of its growth story and monetization potential. It is anything but a mature business and if Left had studied its most recent results, he would have seen a company that has not only defied investor skepticism over the past four years, but proven adept at growing consistently, rapidly and profitably. We like visibility. Our $145-a-share price target reflects 30x next year's EPS (we view $4.80 a share as fair) which, considering the 40% year- over-year growth, implies a price-to-earnings-growth (PEG) multiple of 0.75x, which would still be the lowest across the entire large-cap tech space.