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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 seven of the most active stocks on the market today.
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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 names.
Bank of America
Nearest Resistance: $8.20
Nearest Support: $7.55
Catalyst: Technical Support Bounce
Bank of America (BAC) is a perennial super-active stock, but it’s seeing special attention today in part because of a test of technical support at $7.55. BofA has been consolidating for the past two weeks, bouncing almost perfectly between that support level at $7.55 and resistance at $8.20. A breakdown below $7.55 would derail the uptrend that shares had been in since BAC’s swing low at the end of May.
I’d recommend shorting if that breakdown happens. It’s a signal that BAC can’t catch a bid at a level that previously held a glut of buying pressure.
For another take on Bank of America, it was also featured today in "6 Hated Stocks to Stay Away From."
Nearest Resistance: $8.95
Nearest Support: $8.30
Alcoa (AA) is another stock that’s getting plenty of trading attention today. Shares are seeing huge volume after the firm announced earnings last night, officially kicking off earnings season for the second quarter. Alcoa beat analyst estimates for the quarter -- but just barely -- pulling in 6 cents per share in profits before one-time charges got recorded. Analysts had expected the company to earn 5 cents. Shares initially popped higher on the news, but they’re down around 4% as I write after Mr. Market made an about-face of his own.
From a technical standpoint, though, Alcoa’s earnings aren’t a huge deal. The company is one of the most inconsistent names when it comes to earnings (making it ironic that it kicks off numbers each quarter), and it effectively fell in-line with Wall Street’s expectations. Shares are stuck in between resistance at $8.95 and support at $8.30.
Until AA exits that range, it’s making “easy moves." Wait for a breakout before trading it.
Nearest Resistance: $21
Nearest Support: $14
Catalyst: Q2 Earnings, Downgrade
Small-cap medical device maker Mako Surgical (MAKO) is getting utterly shellacked today, down more than 40% this afternoon. When a small-cap name makes the list of the most-active stocks in the market, you know something big is going on -- and it’s clear from Mako's price action today that that something isn’t good. A big downgrade from Goldman Sachs after yesterday’s opaque (but negative) earnings call was the big precipitating factor for Mako.
Mako is in freefall right now, and it’d be a mistake to think that today’s selloff is the end of it. Shares gapped down hard this morning, but they’ve been in a sustained downtrend since April, a time over which the stock’s value declined by close to 65%. Mako's fundamentals might attract some bargain hunters at these levels, especially given that it has plenty of liquidity and no debt on its balance sheet.
Mako may be cheap by some measures, but it’s far enough away from support that it could get much more cheap in the near-term. I’d recommend sitting this one out.
Nearest Resistance: $20.20
Nearest Support: $19.85
Catalyst: Solar Factory Suspended
Last up on our look at Wall Street’s most active names is General Electric (GE), another perennially popular name that’s getting some extra attention after the firm announced that it would be suspending plans for a solar panel factory in Colorado due to headwinds in the green energy business. The news doesn’t materially impact GE’s business, but it is putting some extra eyes on shares today.
Technically, GE has been in a sharp near-term uptrend since the beginning of June, and the last week’s price action currently just looks like a throwback to trendline support. I’d buy the bounce off of the $19.85 level this week.
If you decide to take this trade, make sure you put a protective stop in place.
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.