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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 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 stocks.
Nearest Resistance: $2.00
Nearest Support: $1.75
Catalyst: “Less Bad” Earnings
Shares of mobile phone maker Nokia (NOK) are pushing more than 7% higher today, the result of “less bad” earnings than analysts had been expecting. Yes, Nokia did post a 1.41 billion euro loss for the quarter -- a bigger one than last year’s too -- but Wall Street was expecting the worst, and investors were pleasantly surprised by the actual result.
The sustained downtrend that shares have been in since late March hasn’t abated yet, and the pop in Nokia is fading into the afternoon. I’d look to go short on a push below $1.75.
For another take on Nokia, it was also featured recently in "6 Hated Stocks to Stay Away From."
Nearest Resistance: $35.50
Nearest Support: $34
Catalyst: Pharmacy Network Deal
Pharmacy retailer Walgreen (WAG) is rallying today too, up more than 10% as I write thanks to a pharmacy network deal that got penned between the firm and Express Scripts (ESRX). The two companies had been feuding for the last seven months, unable to agree on pricing deals to let ESRX customers fill their prescriptions at WAG retail locations. The standoff was worse for Walgreen than it was for ESRX, so it’s understandable that buyers are piling back into shares on the news.
Walgreen gapped up hard this morning, something that makes trading this stock a whole lot trickier. Right now, WAG has weak support at $34 and a stronger resistance level at $35.50 -- not an ideal situation. That said, the downtrend that WAG has been stuck in since late April is definitively broken, and that bodes well for investors even if WAG gives back a few points later in the week.
I also featured Walgreen last month in "7 Dividend Stocks That Want to Pay You More Cash."
Nearest Resistance: $14.50
Nearest Support: $13.25
Catalyst: Earnings Miss
On the other side of the spectrum, Morgan Stanley (MS) is down more than 4% today after the firm reported a 50% drop in earnings for the second quarter. The news came as a surprise to Wall Street, particularly after other high-profile financials have managed to eke out better-than-expected earnings this week.
Technically, the move lower brings MS closer to triggering a less than attractive pattern -- a head and shoulders that has a neckline at $13.25. If MS can’t catch a bid at that support level, then further downside has the highest probability for this stock in the near-term. If you decide to bet against Morgan Stanley on a breakdown below $13.25, I’d recommend putting in a protective stop just above the right shoulder at $14.50.
Morgan Stanley shows up on a list of 8 Post-Downgrade Bank Stock Bargains.
Nearest Resistance: N/A
Nearest Support: $43.75
Catalyst: Positive Earnings
eBay (EBAY), on the other hand, gapped up big this morning following better-than-expected earnings news. The online auction site saw profits climb to $692 million on the success of the firm’s PayPal unit in the second quarter. The move brings shares of eBay to a new 52-week high in this afternoon’s trading.
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.
For late-to-the-game buyers, though, I’d recommend sitting on the sidelines until EBAY pushes above today’s high water mark.
Ebay, one of the 10 Best-Performing S&P 500 Stocks in the Second Quarter, was included on a list of 10 Stocks of Top-Performing Mutual Funds in 2012.
New Oriental Education
Nearest Resistance: $14.50
Nearest Support: $9.50
Catalyst: SEC Investigation
Chinese for-profit education company New Oriental Education (EDU) fell off a cliff earlier this week when the SEC announced that it was investigating the potential for fraud in the firm’s financial statements. EDU has slid more than 46% in the last five trading sessions, and even though shares are bouncing today, that doesn’t mean that now’s a big bargain opportunity. We’re still far enough from support that shares could have dramatically further to fall even if no more fundamental news comes out.
EDU is just the latest in a string of Chinese companies that have been accused of committing fraud. Other names that have gone through similar drama in recent years haven’t been resolved quickly and easily. Investors should steer clear of this name.
As of the most recently reported period, New Oriental Education was one of Steve Mandel's Lone Pine Capital holdings.
Nearest Resistance: $59
Nearest Support: $57
Catalyst: Positive Earnings
Qualcomm (QCOM) is up almost 4% as of this writing after the firm posted better-than-expected earnings for its fiscal third quarter. Even though the firm’s positive earnings numbers came in below analyst estimates, a wave of negative sentiment surrounding chipmakers in the last week likely had more than a little to do with Wall Street’s reaction to QCOM’s earnings.
Things weren’t as bad as they first appeared thanks to growth in emerging markets and more abundant 3G and 4G deployment -- tech that QCOM’s patent vault earns royalties for. Resistance at $59 has been challenging for Qualcomm to move above in the past. If shares push through that level, I’d recommend buying with a protective stop at the 200-day moving average.
Nearest Resistance: N/A
Nearest Support: $3.50
Catalyst: News from Symposium
Finally, cell phone carrier Sprint Nextel (S) is getting some positive attention today after the firm presented at Wells Fargo’s (WFC) Wireless Spectrum Symposium. Sprint announced (among other things) that it was expanding its pilot program to provide car usage data to auto insurers, a product addition that could provide a decent boost to Sprint’s top-line. With Sprint’s earnings slated for next week, plenty of trading volume is coming from investors hoping to pile up on shares ahead of time.
Like eBay, Sprint is getting boosted to a new high in today’s trading session. Investors looking for relative strength should be buyers if Sprint can eclipse today’s highs.
Sprint was also featured recently in "4 Stocks Under $5 Making Big Moves."
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.