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5 Big 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.
Two Harbors Investment
Nearest Resistance: $14
Nearest Support: $13
Catalyst: Share Offering
It may seem unlikely that mid-cap mortgage REIT Two Harbors Investment (TWO) ranks as one of today’s most actively traded stocks. The $4.1 billion company is only off 1.37% today, yet it’s already traded around six times its normal volume only midway through Tuesday’s market session. Two Harbors is seeing its attention as the result of a 50 million share offering that got announced after the close yesterday. The news is proving enough to spark significant activity in shares.
From a technical standpoint, Two Harbors is seeing some interesting price action. The stock has been rallying hard for the last four months, up more than 23% since mid-November. But shares hit hard resistance at $14, a price level that’s threatening to put an end to the stock’s rally.
At this point, the best course of action is to sit and wait for shareholders to figure out their next move. I’d be a buyer on a move through $14, but not until then.
Nearest Resistance: $2.50
Nearest Support: N/A
Catalyst: Massive Layoffs
Another unlikely high-volume stock today is Affymax (AFFY). The $42 million biopharmaceutical firm is getting shellacked this afternoon following news that the firm would be cutting 75% of its workforce in a last-ditch effort to cut costs. The news is sending AFFY down more than 62.7% today alone, making it the biggest loser on the Nasdaq by far, and shoving it within a few cents of the critical $1 level.
Technically speaking, Affymax is in very deep trouble; the stock just can’t catch a bid. And that’s put AFFY at new 52-week lows, a psychologically important condition that’s adding fuel to the fire for sellers. For traders, if you’re looking for an opportunity to get into AFFY at a bargain price, don’t. This stock is 100% speculative from this point on.
Nearest Resistance: $19.50
Nearest Support: $17
Catalyst: CEO Resignation, Negative Guidance
Electronic Arts (EA) is another name that’s getting sold off today, even if it’s not moving quite as hard as Affymax. The $5 billion video game maker is down more than 8% this afternoon after it announced the 1-2 punch of negative guidance and the resignation of CEO John Riccitiello. EA has made some conspicuous missteps of late, most recently with the highly publicized problems with the newly released Sim City game that left more than one million buyers unable to play the title.
While EA looks somewhat “toppy” after the drop today, the big red candle isn’t the most significant part of this stock’s price chart. Instead, it’s more significant that shares haven’t actually broken their primary uptrend since November. As long as that support line stays intact, more upside looks likely once sellers calm down. Look to buy on a bounce.
Nearest Resistance: N/A
Nearest Support: $42
Catalyst: Earnings Surprise
On a more positive note, pharmacy chain Walgreen (WAG) is up close to 5% today following the announcement of second-quarter profits that bested expectations. Walgreen’s expanding margins are only part of the story; an attractive alliance with drug distributor AmerisourceBergen (ABC) revealed today could lead to even bigger profits for the firm down the road.
Walgreen’s news is sending it to new 52-week highs, a bullish signal for the same reason that the new lows in Affymax are bearish. 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.
Investors who aren’t too risk-averse may want to consider buying here.
Hospitality Properties Trust
Nearest Resistance: $27
Nearest Support: $23
Catalyst: Share Offering
Last up on our list of the market’s most-active names is Hospitality Properties Trust (HPT), a $3.24 billion REIT that owns 288 hotels and 185 travel centers located across North America. HPT is getting attention today after the firm announced that its 14 million share offering generated $357.7 million in cash for the firm. Shares are down 3.67% in this afternoon’s session on the dilution.
And they could be headed down even more. While REITs have shown stellar relative strength in 2013, HPT is looking like it has run its course. The stock had been forming a double top pattern, which triggered today after the offering-related drop in price. That makes support at $23 look like a more probable target price in the near-term.
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.