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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.
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 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: $12
Nearest Support: $10.50
Catalyst: Good Guidance, Earnings Beat
First up is Pandora Media (P), the Internet radio company that IPO’d last summer. Pandora has been one of the many tech IPOs that flailed after going public, souring investors tastes for newly-public firms. But things just got a whole lot sweeter at Pandora: The firm announced solid guidance as well as break-even numbers for the second quarter, besting Wall Street’s expectations. That’s sending shares more than 18% higher in early afternoon trading.
From a technical standpoint, the Pandora trade is a big deal. Today’s gap up is pushing shares higher to test resistance at $12, a price that’s acted as a ceiling for the last few months. If this stock can catch a bid and close above $12, I’d recommend being a buyer in the short-term at least.
Pandora was also featured earlier this week in “5 Stocks Set to Soar on Bullish Earnings.”
Nearest Resistance: $13
Nearest Support: $10
Catalyst: Analyst Upgrade, New Rare Earth Project
Everyone’s favorite rare earths producer, Molycorp (MCP), is having a pretty phenomenal week. Shares of the small-cap firm have rallied more than 27% in the last five trading sessions. The upward slingshot has been the result of an analyst upgrade and an announcement that the firm would be launching a new rare earth project in Mountain Pass, Calif.
Technically, the move in MCP is critical. Shares had been in a brutal downtrend for most of 2012, but started forming the early stages of an inverse head and shoulders pattern at the start of August. Now shares are approaching their neckline at $13. For this pattern to look “textbook,” we’ll want to see a right shoulder get formed by a pullback before breaking out in earnest.
But the pattern doesn’t have to be textbook to be profitable. The buy signal comes on any sustained breakout above $13. Just remember to keep a tight protective stop if you decide to trade this volatile small-cap.
Nearest Resistance: $50
Nearest Support: $47
Catalyst: S&P 500 Slot
LyondellBasell Industries (LYB) is up more than 3% as I write this afternoon, buoyed by news that the chemical company will replace beleaguered Sears Holdings (SHLD) in the S&P 500. Because the S&P is the most heavily “bought” index, with scores of index funds designed to mirror its makeup, a lot of institutional buyers are going to be forced to pick up shares of LYB -- thus the pop from the news.
Don’t overdo it, though. Institutional buying pressure from an index change isn’t typically that consequential, so the upside is probably already priced into shares. What is consequential, though, is the technical setup that’s taking place in LYB right now. We’re within striking distance of $50 resistance right now; if LYB can break out above $50, I’d recommend buying.
Nearest Resistance: $31
Nearest Support: $29
Catalyst: CDO Suit Settlement
Last up is big bank Citigroup (C), a stock that’s getting ample attention today after news that the firm agreed to pay $590 million to settle a lawsuit over misrepresenting exposure to toxic CDOs after the real estate bubble burst. Ultimately, the settlement is a slap on the wrist for Citi, and isn’t likely to have a big impact on its share price despite the extra trading volume it’s spurring.
Shares are close to $29 support right now, still in an uptrend from the stock’s double bottom back in late July. For Citi bulls, this throwback to $29 is a good second chance at a low-risk entry point.
Just keep a tight stop under that $29 level if you want to be a buyer here.
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, 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.