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3 Big Retail Stocks to Trade (or Not) - views
BALTIMORE (Stockpickr) -- 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 today.
These "most active" names are the most heavily-traded names on the market -- and often, uber-active names have some sort of a technical or fundamental catalyst driving investors' attention on shares. That's especially true now that earnings season is officially underway. And when there's a big catalyst, there's often a trading opportunity.
Without further ado, here's a look at today's stocks.
Nearest Resistance: $13.75
Nearest Support: $12.50
Catalyst: Ackman Board Resignation
Department store retailer J.C. Penney (JCP) has been catching headlines after hedge fund manager Bill Ackman conspicuously resigned from the firm's board earlier this week. Ackman, Penney's largest investor, had been feuding with management over how to right JCP's struggling ship. The resignation should help to calm some of the drama surrounding this stock for a while -- and opening the door for the possibility of an offer to take the retailer private.
JCP's chart has been forming a rectangle pattern for the last handful of trading sessions, with resistance to the upside at $13.75 and support below shares at $12.50. I'd recommend becoming a buyer if JCP can crack $13.75.
Nearest Resistance: $78
Nearest Support: $73
Catalyst: Earnings, Outlook Miss
The world's biggest retailer, Wal-Mart (WMT), just barely missed Wall Street's earnings expectations for the second quarter, making $1.24 per share. That fell short of estimates by a single penny, but it's the lackluster outlook that's sending shares down 2.5% in this afternoon's trading.
WMT is looks "toppy" from a technical standpoint. The stock has been forming a double top pattern in the long-term, a setup that triggers a sell if shares move through support at $73. If you decide to go short there, it makes sense to keep a protective stop at the 50-day moving average.
Nearest Resistance: $54
Nearest Support: $50
Catalyst: Earnings Beat
Last up on our list of most-active names today is Kohl's (KSS), a stock that's seeing hefty trading volume after posting good earnings numbers for the second quarter. Kohl's earned $1.04 per share for the quarter, the result of fatter margins thanks to bigger private label offerings in its stores. Shares are up 4.5% this afternoon on the news, flirting with setting a new 52-week high.
Making new highs is significant from an investor psychology standpoint because it means that everyone who has bought shares in the last year is sitting on gains. As a result, the "back to even" mentality is less of a concern than it would be for a name with a higher proportion of shareholders sitting on losses.
Wait for $54 resistance to get taken out before jumping into this trade.
To see these stocks in action, check out the at Most-Active Stocks portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.
Follow Jonas on Twitter @JonasElmerraji
Follow Jonas on Twitter @JonasElmerraji