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7 Hot Stocks on Traders' Radars - views
BALTIMORE (Stockpickr) -- Forget the traditional ways 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 traders 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 highest-trending stock searches on Google (GOOG).
Here’s a look at how these most searched names are trading technically.
Computer Sciences Corporation
Nearest Resistance: $26
Nearest Support: $23
Catalyst: Asset Write Down
Shares of Computer Sciences Corportation (CSC) saw a near-9% haircut yesterday on news that the firm may have to take a $1.5 billion write-down on a contract dispute with Britain's National Health Service. That news caps off an awful year for the $3.7 billion IT services firm; counting yesterday’s decline, CSC has seen its share price halved in 2011.
From a technical standpoint, the 9% knock isn’t particularly relevant. Shares remain above support at $23 and below the $26 resistance level that they only opened above for the first time last Friday. For traders looking for a play off of this name, I’d recommend waiting for shares to push out of that range.
CSC, one of the top-yielding computer software and services stocks, shows up on recent lists of 19 S&P 500 Laggards That Could Be Leaders in 2012 and 5 stocks JPMorgan Warns to Absolutely Avoid.
Nearest Resistance: $45
Nearest Support: N/A
Catalyst: Store Closures
CSC’s drop yesterday looks pale compared with the slide in Sears Holdings (SHLD) on Tuesday. The $3.5 billion department store icon dropped more than 27% in yesterday’s session, marking the firm’s worst single-day drop since 2003.
The selloff was spurred by news that the company would be shuttering as many as 120 stores to cut costs. The news is the nail in the coffin for a company that’s been dying a slow death as it consistently fails to leverage the massive assets at its disposal.
The drop is also a nail in the coffin for Sears’ chart. The decline plummeted Sears through previous support at $45, a level that now acts as a very lofty resistance level. As investors start rummaging for a bargain in shares of Sears this week, keep in mind that this stock remains in freefall. Wait for SHLD to set support before even considering a stake in this stock.
I also featured Sears recently in "7 Extreme Stocks to Trade in This Volatile Market."
Nearest Resistance: $50
Nearest Support: $45
Catalyst: Sears’ Store Closures
Sears isn’t alone in its suffering this week -- Whirlpool (WHR) is along for the ride as well. Whirlpool generates approximately 20% of its sales through Sears’ stores, so the idea that the department store giant may be moving fewer dishwashers and refrigerators could have a big impact on WHR.
While shares “only” fell 8.9% in yesterday’s session, the trading implications in this stock are better than those in Sears.
Right now, Whirlpool is forming a descending triangle, a bearish setup that’s identified by a horizontal support level acting as a sort of “floor” for shares as downtrending resistance creeps in on them. A breakdown below $45 support would be a signal that any demand has capitulated and this stock is now a solid short candidate. Keep a protective stop at the 50-day moving average.
Whirlpool, one of TheStreet Ratings' Top-Rated Home Appliance Stocks, shows up on a recent list of 5 Worst Consumer Stocks That May Be Stars in 2012 and was featured recently in "5 Top S&P 500 Bargain Stocks for 2012."
Magnum Hunter Resources
Nearest Resistance: $8
Nearest Support: $5.25
Catalyst: Guidance Hike
On the other side of the spectrum is Magnum Hunter Resources (MHR), an oil and gas stock that rallied 17% yesterday on a guidance hike from management. The firm expects to outpace production targets on its new wells, a crucial milestone for a small-cap in the speculative E&P business.
Another milestone is the technical breakout that shares made with yesterday’s rally. The pop in shares pushed MHR’s price above the $5.25 level that’s previously acted as a ceiling for shares, completing a complex inverse head-and-shoulders that’s been slowly forming in shares since the beginning of August.
If you decide to be a buyer today, I’d suggest keeping a protective stop just below the 50-day moving average.
Nearest Resistance: $36
Nearest Support: $35
Catalyst: Positive Earnings
Cal-Maine’s (CALM) claim to fame is as the country’s largest producer of eggs, cranking out more than 670 million dozen per year. This company is also cranking out earnings performance; its fiscal second quarter saw profit growth of 53% thanks to higher selling prices and increased demand for eggs.
And because CALM’s dividend is linked to its profitability, the firm ratcheted its dividend payout up to 32.5 cents for the latest quarter.
Technically, Cal-Maine is looking equally good. The firm gapped higher on its earnings news, popping up to test long-standing resistance at $36. A breakout above that level would bring a strong “buy” signal with it. CALM has shown solid relative strength vs. the broad market this year -- and it looks like shares will enter 2012 on the same track.
CALM was also featured yesterday in "7 Stocks Rising on Unusual Volume."
Mead Johnson Nutrition
Nearest Resistance: $70
Nearest Support: $66
Catalyst: Positive FDA Test
The last week has been rocky for shares of Mead Johnson Nutrition (MJN), the world’s largest baby formula maker. Shares plummeted last week when speculation arose that the death of a newborn in Missouri could be linked to tainted formula -- but test results today indicate that the batch didn’t contain the bacteria. At this point, regulators are continuing to investigate before making a comment about whether MJN’s products were at fault.
Mead Johnson had been forming an ascending triangle setup, the bullish opposite of the setup we’re seeing in Whirlpool. If shares recover back into their previous range, the setup could still have bullish implications == but that’s a big “if.”
Shorter-term, a break above $70 resistance will likely come with additional upside.
Mead Johnson is one of the top holdings at Steven Cohen's SAC Capital, which increased its position in the stock by 47% in the third quarter, and comprises 3.6% of Daniel Loeb's Third Point portfoli0.
Nearest Resistance: $120
Nearest Support: $102
Catalyst: Online Gambling Speculation
Finally, Wynn Resorts (WYNN), one of the highest-yielding leisure stocks, is getting considerable attention today following a Justice Department decision over the weekend that could open the door for legal online gambling websites in the U.S. Investors see that as a new potential revenue stream for established gaming firms -- Wynn chief among them.
The story comes just in time for Wynn, a stock that’s been stuck in a downtrend since the start of the summer. While yesterday’s buying helped shove shares a few points higher, they still haven’t broken Wynn’s downtrending resistance line -- until that happens, it doesn’t make sense to buy this stock.
The 50-day moving average is acting like a good proxy for the trend line right now; buy a breakout above that level.
To see these stocks in action, check out the at Most-Searched 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.