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.
Advanced Micro Devices
- Nearest Resistance: $9
- Nearest Support: $6.60
- Catalyst: Offering
Chipmaker Advanced Micro Devices (AMD - Get Report) is down almost 7% on big volume this afternoon, swatted lower following the firm's filing to issue $1.02 billion in shares and convertible notes, a move designed to take advantage of recent price strength to reduce its debt load. AMD has been rocketing higher all year long, up more than 136% since the start of the calendar year. That recent rally means that AMD is getting bigger proceeds from less dilution, making the timing look pretty smart on management's part.
From a technical standpoint, AMD is down this afternoon, but it's not out yet. Shares are holding on to their long-term uptrend from the beginning of the year, and unless that uptrend gets violated, it still makes sense to buy the next bounce higher in AMD.
- Nearest Resistance: $18
- Nearest Support: $12
- Catalyst: Offering
$2 billion independent oil and gas company Callon Petroleum (CPE - Get Report) is seeing big volume this afternoon, ranking as one of the most actively traded issues on the NYSE thanks to a 26 million share offering. Callon plans on using the $379.6 million in proceeds from the share offering to fund its Plymouth acquisition. The firm is holding up well following the pricing of its shares -- well enough that the offering actually got upsized from an originally planned 23 million share sale.
Callon is a stock that's been in a pretty well-defined uptrend in 2016. That fact isn't changing with today's offering update. In fact, shares are currently well within the middle of their price channel, indicating that shares could still correct all the way down to $12 from here without threatening their longer-term trajectory. Buyers should wait for a pullback closer to support before pulling the trigger on Callon here.
- Nearest Resistance: $140
- Nearest Support: $120
- Catalyst: Analyst Upgrade
Facebook (FB - Get Report) , which is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio, is up slightly on big trading volume this afternoon, getting attention following a higher price target from analysts at Morgan Stanley. The boost puts Morgan Stanley's price target for Facebook at $160, implying the potential for a 23% upside move from here.
Based on Facebook's price action right now, that's not a totally implausible move. Shares have been in an uptrend all year long, and the nearest resistance level on the chart does come into play until all the way up at $140. If you're looking for a buying opportunity in Facebook, consider waiting for a pullback closer to trend line support before clicking "buy."
Sprouts Farmers Market
- Nearest Resistance: $22
- Nearest Support: N/A
- Catalyst: Guidance Cut
Natural foods retailer Sprouts Farmers Market (SFM - Get Report) is selling off on big volume this afternoon, down more than 13% after the firm announced a cut to guidance. Management udated its full-year EPS forecast to between 83 cents and 86 cents per share, down from the 92 cent to 94 cent profit target that had previously been in place. Analysts were expecting full year earnings to come in at 94 cents per share.
Today's drop in Sprouts opens up considerable downside risk for shares. While this stock had been forming a descending triangle pattern for the last several months, it triggered with today's violation of support at $22. Sprouts could end up a lot lower before finding any semblance of support.
Whole Foods Market
- Nearest Resistance: $30.50
- Nearest Support: $28
- Catalyst: Sympathy Move
$9 billion natural foods retailer Whole Foods Market (WFM) is down almost 5% on big volume this afternoon, tumbling in a sympathy move following the guidance cut from peer Sprouts Farmers Market. Investors are worried that the same competitive environment that's threatening earnings at Sprouts will carry over to larger chain Whole Foods.
Like with the SFM setup, Whole Foods is violating an important support level in reaction to the update. While $28 looks like a moderately strong support level from here, buyers should avoid being long WFM until shares can establish a series of higher lows again.
- Nearest Resistance: $55
- Nearest Support: $42.50
- Catalyst: Guidance Boost
Western Digital (WDC - Get Report) is up 12% this afternoon, rallying following a guidance boost for the firm's first-quarter earnings. Previously, Western Digital had expected earnings between 85 cents and 90 cents per share; now the firm is calling for profits to hit between $1 and $1.05 per share. That's spurring buying in this $15 billion computer storage stock after a sharp and prolonged decline from the start of 2015 through today.
Long-term, WDC looks "bottomy." Shares have spent much of 2016 forming a textbook example of an inverse head and shoulders pattern, a price setup that triggers a buy signal if shares can muster the strength to catch a bid above the $55 level. That's a price ceiling worth watching this week as shares move up within grabbing distance of a breakout.
HD Supply Holdings
- Nearest Resistance: $35
- Nearest Support: $28
- Catalyst: Q2 Earnings
HD Supply Holdings (HDS - Get Report) is tumbling this afternoon, down more than 15% after the firm posted its second-quarter earnings numbers. HDS earned a profit of 85 cents per share, coming in just below the 87-cent profit that Wall Street had been expecting, on average. But management expectations for the third quarter came in well below what analysts had been expecting, and that miss is driving the lower price level this afternoon.
HDS had actually started off the week looking attractive from a technical standpoint, with a textbook ascending triangle pattern forming in shares. Today's big price drop means that the bullish pattern is busted before it even had a chance to trigger, opening up the possibility of considerable downside risk from here. HDS is a stock that's best avoided in September.