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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 highest-trending stock searches on Google.
With the tail end of earnings still ruling the market this week, you can bet that earnings is a major driver of searches today. Here’s a look at how these most-searched names are trading technically.
Nearest Resistance: $33.40
Nearest Support: $31
Catalyst: High-Profile IPO
No stock is getting more attention right now than Facebook (FB). After the social network’s oversubscribed IPO on Friday, the stock has effectively dropped like a rock, earning it the name “Fadebook” from traders. The market has reacted poorly to the lofty valuations in tech IPOs of the past year or so, and Facebook’s super-hyped story is no different.
What is different is the fact that Facebook opted to massively increase its share offering at the last minute, dramatically increasing the public float for shares of FB. With Groupon (GRPN) and the like, artificially low float made shorting too tough. Not so with Facebook.
I would recommend staying as far away from Facebook as possible until this name establishes a more telling trading history.
Nearest Resistance: $46
Nearest Support: $41
Catalyst: Cooper Acquisition
It’s been a rough quarter for shareholders of Eaton (ETN). In those past three months, the power management stock has fallen close to 20%. Now, with more eyes on the company following yesterday’s announced acquisition of Cooper Industries (CBE), is a reversal in store?
From a technical standpoint, Eaton’s orderly selloff has been brutal; shares even fell further yesterday, when investors in the broad market were buying with both hands.
Today’s bounce higher is a big deal, though. It’s showing traders the combination of a harami bar in the very short-term, as well as a reversal in momentum from oversold to more regular territory. Short-term traders can buy the bounce now with a tight protective stop in place.
In the longer-term, we may see $41 before Eaton can catch a meaningful bid. Value-centric buyers should wait to take a position until a more meaningful support level has been carved out.
Eaton shows up on a list of 10 Industrial Stocks Poised for a Rebound.
Nearest Resistance: $30
Nearest Support: $25.50
Catalyst: Strong Earnings
Urban Outfitters (URBN) announced earnings after the close yesterday, spurring a 7% rally in shares in today’s session. While the firm announced lower profits, investors are grabbing onto the record $569 million in quarterly revenue that it did manage to bring in.
With black clouds forming over the economy this quarter, Wall Street hadn’t expected such large top-line growth from a consumer discretionary name. That’s why URBN is getting so much search volume today.
Traders should be paying attention too. URBN’s massive candle today is essentially bringing shares back to where they were at the start of May, an impressive feat. Even so, keep in mind that URBN is moving up to a resistance level at $30, not through it.
I’d recommend sitting out until shares can break out above $30.
Nearest Resistance: $375
Nearest Support: $365
Catalyst: Strong Earnings
Another strong earnings stock today is AutoZone (AZO), which is catching a strong bid after a 9.3% top-line improvement for the third quarter and steady profit margins. But while the fundamentals are strong in AZO, the technical outlook is less so.
Shares opened at $357, a price that represents a major gap down from Monday’s close price. Even though buying pressure has been shoving shares back to even for the day, the price reaction to earnings hasn’t been stellar.
While it’s a great sign that AZO can catch a bid below $365 support, I wouldn’t pile into this crowded trade right now. Instead, wait to see how AZO handles an attempt above resistance at $375.
Cracker Barrel Old Country Store
Nearest Resistance: $59
Nearest Support: $57
Small-cap restaurant stock Cracker Barrel Old Country Store (CBRL) is taking a page from Facebook today, and fading its earnings after opening significantly higher at $60 this morning. CBRL’s wide-spanning move today is coming after the firm announced an increase in quarterly profits and guidance that was in-line with estimates.
Even though CBRL’s swing pushed it back down below $59 resistance, the fact that we’re within spitting distance of 52-week highs is significant.
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.
A buy signal comes on the next break above $59.
Nearest Resistance: $165
Nearest Support: $142
Catalyst: Positive Earnings
Fashion stock Ralph Lauren (RL) is moving off of earnings news today, up more than 4% after topping Wall Street’s profit expectations for the quarter. Analysts had been expecting RL to turn out EPS of 85 cents, but the firm actually took home 99 cents for the quarter.
But just because RL is getting attention doesn’t mean that there’s a trade in this stock right now.
Ralph Lauren is carving out a v-bottom from support at $142, and while that’s great for RL shareholders, we’re still too far in between resistance at $165 and retesting $142 again to justify a technical trade either way. Instead, it makes sense to pick a different option for a high-probability trade this week.
Nearest Resistance: $22
Nearest Support: $17.50
Best Buy (BBY) is a perfect example of that other option. Like RL, Best Buy is pushing higher after Wall Street decided that the firm’s lackluster first-quarter results still had a little bit more luster than they’d expected.
It’s been a rough road for Best Buy over the last few months, and the firm’s share price shows it -- from a sketchy CEO ouster to online retailers eating its lunch, shares have tumbled more than 20% on the year. But now, another v-bottom pattern is giving traders a chance to buy in the short-term.
The v-bottom came into play when BBY formed a bullish piercing pattern in yesterday’s trading session. Even though the pattern looked positive, the speculative money likely stayed on the sidelines ahead of earnings. Now that the news is out, that money is coming back in. Best Buy is a whole lot closer to support at $17.50 than it is to its next upside barrier at $22. That gives a long side trade a decent risk-reward tradeoff right now.
If you decide to be a buyer here, put a tight stop right at yesterday’s open.
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.