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4 Hot 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: N/A
Nearest Support: $34
Catalyst: Going Private Offer
An M&A mover today is rue21 (RUE), a specialty apparel retailer that's up around 23% after news that private equity firm Apax Partners wanted to take the firm private for $42 per share. Apax already holds a 30% stake in RUE, adding to the likelihood that the deal will get completed. RUE does still have some upward potential from here, however. The firm has a 40-day go-shop window to try to get a better price in a sale, a scenario that could spur a bidding war for rue21.
From a technical standpoint, today's price action blows RUE's chart away. While shares had been making an attractive uptrend since the end of February, today's massive gap higher significantly changes things. While the risk premium is tiny for would be merger arbitrageurs, the possibility of a higher-priced suitor makes RUE a good option for speculators this month.
Nearest Resistance: N/A
Nearest Support: $4.5
Catalyst: Analyst Report, Short Squeeze
Development-stage biopharmaceutical firm MannKind (MNKD) is up more than 7.7% this afternoon of heavy trading volume, a continuation of the huge leg higher that this stock has been on for most of May. The biggest spark for MNKD was a report from a Piper Jaffray analyst that pointed to the high probability of an acquisition offer once MannKind's inhaled diabetes drug Afrezza is approved by the FDA. That speculation helped spur a short squeeze in MNKD as short sellers scrambled to cover their positions.=
From a technical standpoint, the new highs in MNKD continue to look bullish. 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. Risk-tolerant traders can enter a position here with a tight stop in place.
iShares MSCI Japan ETF
Nearest Resistance: $11.75
Nearest Support: $11
Catalyst: Nikkei Sell-Off
Japanese stocks sold off hard in their session overnight last night, making the iShares MSCI Japan ETF (EWJ) one of the most heavily traded names on the NYSE today. The fund is one of the most accessible ways for U.S. investors to get exposure to the Japanese market, so the 7.3% decline in the Nikkei 225 overnight is carrying over to this exchange-traded fund today.
To be clear, I don't think that Japanese stocks are in another bursting bubble. I don't think that we've seen all there is to see in Japan's rally, but I do think that the parabolic price action in Japanese indexes was too far too fast. While the correction was violent, EWJ is still sitting on 23% gains in the last six months. From here, it looks like EWJ is catching support at the 50-day moving average. For new buyers, I'd recommend waiting for Japanese stocks to establish more support before building a position -- but I wouldn't sell here if I already owned this ETF.
National Bank of Greece
Nearest Resistance: $2.40
Nearest Support: $1.20
Catalyst: Fitch Upgrade Hangover
Last up is National Bank of Greece (NBG) a name that's been getting some insane attention since an upgrade from Fitch last week buoyed shares of beaten-down Greek financial intuitions. Today's 8% decline in NBG is just a hangover from the price explosion last week.
As crazy as trading has been in NBG, this stock has been pretty technically obedient. The support and resistance levels that I pointed out last week seem to be holding up well and now, with shares settling in on top of support at $1.20, sellers could be in for a break. But I still wouldn't recommend jumping into this Greek bank. Headline risk is still too huge to make NBG a truly high-probability 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