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 and market data 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.
Big picture, the sideways chop is continuing this week. And, as always, some important stories are emerging in the most heavily traded stocks on the market right now.
More importantly, those market-moving narratives are creating trading opportunities for investors who are paying attention.
So, today, we'll leverage the power of the crowd to take a look at some of the most active stocks on the market.
Meanwhile, Jim Cramer talks about oversold retail stocks on Real Money. Get his insights or analysis with a free trial subscription to Real Money.
Bank of America
- Nearest Resistance: $24
- Nearest Support: $22
- Catalyst: Trading Revenue Drop
Bank of America (BAC - Get Report) is consistently one of the highest-volume issues on the NYSE - but today it's getting that distinction for the wrong reasons. Shares are down 2.7% as I write this afternoon, following CEO Brian Moynihan's talk at the Bernstein conference, where he signaled a decline in second-quarter trading revenue. That comes at the same time other large banking peers are reporting the same, spurring a sector-wide drop in financials.
Technically speaking, BofA has been showing some red flags for a while now -- shares look "toppy" thanks to a textbook example of a head-and-shoulders pattern. That pattern triggers a sell if shares violate their neckline level at $22. That price tag is being tested in today's trading session. Caveat emptor.
iPath S&P 500 VIX Short-Term Futures ETN
- Nearest Resistance: N/A
- Nearest Support: N/A
- Catalyst: Market Volatility
Meanwhile, prolonged low volatility in the stock market alongside new highs in investor anxiety have prompted active trading in the iPath S&P 500 VIX Short-Term Futures ETN (VXX) , an exchange-traded note that tracks the VIX Volatility Index. Long-term, the overall trend in VXX is pretty unmistakable -- implied volatility has been in freefall all year long.
An important fact about this exchange-traded note is that the 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.
Chesapeake Energy Corp. CHK
- Nearest Resistance: $5.60
- Nearest Support: $4.85
- Catalyst: Technical Setup
$4 billion energy stock Chesapeake Energy Corp. (CHK - Get Report) is seeing a 3.2% drop this afternoon, a drop that's happening on huge volume as a result of an important technical level that's being tested today. Chesapeake has been trending lower since shares peaked back in December, but it's the test of a price floor at $4.85 that's grabbing investors' attention today. Simply put, if CHK violates that $4.85 line in the sand, shares open up meaningful downside risk from here.
Michael Kors Holdings Ltd.
- Nearest Resistance: $36
- Nearest Support: N/A
- Catalyst: Q4 Earnings
Finally, shares of apparel and accessory stock Michael Kors Holdings Ltd. (KORS) are tumbling nearly 10% this afternoon, dropping following the firm's fourth-quarter earnings call. Kors actually beat Wall Street's expectations for the quarter, posting a 73-cent profit vs. the 70-cent profit per share that analysts were expecting, on average. Still, a rough outlook for the quarter ahead, alongside plans to close as many as 125 stores, are spurring the selling today.
Technically speaking, KORS has spent the last few months consolidating in a well-defined trading range. That changed with today's earnings reaction, when shares violated a key support level down at $36. With that line in the sand crossed, KORS has just opened up more possible downside risk in the sessions ahead. Buyers should steer clear until the dust settles.