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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: $19
Nearest Support: $18
Catalyst: Earnings, Downgrades
Shares of VeriFone Systems (PAY) are getting shellacked today after the firm announced earnings and then got downgraded by a deluge of analysts from Wedbush to Barclays to UBS to Jeffries. The firm reported earnings per share of 42 cents for the second quarter, short of analysts' 47-cent estimate. Worse, the firm announced that its third quarter earnings would likely fall in at around half of what analysts had been expecting. That revelation sent PAY down 18% early in today's session.
For now, shares are holding at $18 support. But that support level is tenuous enough that it could fail in the near-term. I'd recommend opportunistic buyers wait for PAY to establish a more meaningful support level before putting money into this name.
Nearest Resistance: $1.80
Nearest Support: $1.70
Catalyst: Technical Setup
Alcatel-Lucent (ALU) is no stranger to hefty trading volume -- the $4 billion French communications stock is perennially on the list of the NYSE's most heavily traded names. Today, ALU is making the list thanks to a key technical setup that's been forming in shares. This afternoon, ALU is within striking distance of a key breakout level.
Resistance at $1.80 is a price that ALU hasn't been able to trade above on a sustained basis since early 2012. On shares' last attempt at that resistance level earlier this year, excess supply swatted down shares again. But this time could be different thanks to the considerable buying pressure that's behind shares. Those buyers are shoving ALU 5.3% higher in today's session, just a few cents shy of that historical price ceiling.
I'd recommend being a buyer if ALU can close above $1.80 -- just keep a tight stop.
Nearest Resistance: $102
Nearest Support: $96
Catalyst: Revenue, Guidance Miss
Despite beating analysts' earnings numbers for their fiscal fourth quarter, J.M. Smucker (SJM) is getting sold off today, thanks in large part to a revenue miss due to declining prices for the foods that Smucker sells. That revenue miss is enough to shove SJM down almost 5% over the course of today's trading, breaking through an important support level at $102.
Smucker had been consolidating sideways in a rectangle pattern with resistance at $104 and support at $102, but today's break of the lower boundary of the pattern looks bearish. Luckily for SJM investors, shares appear to have already reached their price objective for the breakdown, but I'd be skeptical of this stock's trading for the next few sessions. There's been a lot of profit-taking today, and there's no sign of just how many weak hands are still in this stock. I'd recommend waiting for a more meaningful support level to get established before jumping in.
Nearest Resistance: $21.50
Nearest Support: $20
Catalyst: Guidance Miss
Last up on our list of active names is handbag maker Vera Bradley (VRA), a stock that's been slowly selling off over the course of 2013. Today's 10.7% decline on poor guidance numbers is helping to accelerate that downtrend in VRA. Vera Bradley hit its earnings for the first quarter, earning 23 cents per share versus analyst estimates of 21 cents. But VRA guided lower for both second quarter and fiscal year earnings numbers, a fact that's spooked investors who've already been pretty beaten down over the course of the year.
Today's double-digit decline in VRA is ugly, but at least it puts shares back down at $20 support. If VRA can still catch a bid at that $20 level, I'd expect to see some semblance of a correction in the next week as buyers step up to the plate. If you decide to be a buyer here at support, I'd suggest keeping a tight stop in place just above $19.
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