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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.
>>5 Stocks Under $10 Set to Soar 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.
>>5 Blue-Chip Stocks to Beat the S&P 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: $1.90
Nearest Support: $1.30
Catalyst: Sprint Takeover Rumors
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Investors in Clearwire (CLWR) are having a great day. Shares of the $2.5 billion 4G broadband internet provider are rallying more than 35% following news that Japanese cellular carrier Softbank was in talks with Sprint (S) to be acquired. Since Sprint owns 49% of Clearwire, the deal likely trickles down to CLWR shareholders either in the form of a bigger source of capital or an outright buyout offer.
From a technical standpoint, though, there really isn’t a trade to be made here -- yet. CLWR gapped up hard this morning on the news, pushing shares within a few cents of resistance at $1.90. As a result, this stock is still a whole lot closer to resistance than it is to support, making the risk/reward tradeoff look pretty paltry right now. I’d only recommend buying a move above $1.90 to participate in the Clearwire clamor.
Alpha Natural Resources
Nearest Resistance: $9
Nearest Support: $6.50
Catalyst: Romney Policies
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Coal stocks are getting a lot of attention this week, shaking off big bank downgrades and a correcting market to rally following the latest comments from the election circuit. Following comments from Mitt Romney that clean coal power is a better energy strategy than Barack Obama’s focus on clean fuels, scores of coal stocks are pushing higher. One of them is Alpha Natural Resources (ANR), a firm that’s up more than 13% as I write on follow-through from the news.
A big part of ANR’s upward trajectory has come from the technicals. This stock has been dropping like a rock for much of 2012, hammered lower by the drop in coal prices that’s challenged coal firms’ profits. But shares started showing signs of a bottom back in late July, and they’ve been consolidating ever since.
This latest move higher sets the stage for a breakout above $9 resistance in the next week. If that happens, I’d recommend being a buyer of ANR whatever your political affiliation may be.
Nearest Resistance: $8
Nearest Support: $6
Catalyst: Romney Policies
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Another high-volume coal stock today is Arch Coal (ACI), a stock that’s up 13% itself this afternoon for the same politically driven reasons as ANR. Technically, I like ACI’s bottoming action even more than Alpha’s. This stock is forming an ascending triangle bottom right now, with resistance in place at $8. Essentially, $8 has been a sort of ceiling for shares, but uptrending support tells us that buyers still have some control over this stock at lower levels. As ACI bounces higher within its price pattern, the odds of a breakout above $8 are ratcheting higher.
When the breakout above $8 happens, it makes sense to be a buyer. I wouldn’t recommend being early on this trade, though; $8 has turned back the last three rallies for ACI, and it could do the same on this fourth try. That said, with shares at $7.76 as I write, it won’t take long for a more definitive answer. If you decide to buy here, keep a tight stop. Alcatel-Lucent
Nearest Resistance: $1
Nearest Support: N/A
Catalyst: Technical Setup
The opposite setup is taking place in shares of Paris-based communications stock Alcatel-Lucent (ALU). This stock looks definitively bearish right now.
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Put simply, ALU can’t seem to catch a bid. Shares broke down below previous support at $1 this week, dropping down to a 23-year low for shares that exacerbates ALU’s losses in 2012 to 40%. The fact that shares just broke through support at $1 is significant – it means that any buyers who previously were willing to step in and buy what they perceived to be a bargain are now gone at that price. Until this stock catches a bid, I’d stay as far from the long-side of ALU as possible.
Shorts have a chance to see shares go lower from here. I’d recommend putting in a stop just above a buck. To see these stocks in action, check out the at Most-Active Stocks portfolio on Stockpickr. -- Written by Jonas Elmerraji in Baltimore.
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At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.