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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 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: $90
Nearest Support: $78
Catalyst: Earnings “Miss”
Fossil (FOSL) is getting utterly slammed today, down close to 40% today after the firm posted its first quarter earnings before the market opened today. Poor financial performance is being blamed for the selloff, but let’s be real here: The stock didn’t suddenly shed 40% of its fundamental value in this morning’s earnings call. Analysts had been expecting profits of 92.4 cents per share on average -- the firm earned 93 cents. Revenue grew by double-digits vs. the same quarter a year ago.
In reality, it’s not that Fossil delivered horrid numbers at all; Wall Street just really wants to sell today.
From a technical standpoint, FOSL is testing long-term support at $78, a price that acted as a sort of “floor” for shares all the way back in January. A double-top in shares more recently gave early cues of traders’ lack of love for FOSL, just not to this degree. I’d strongly recommend staying away from shares until this accessory stock starts to find equilibrium in shares.
Nearest Resistance: $54
Nearest Support: $46
Catalyst: Earnings “Miss”
Internet hosting stock Rackspace Hosting (RAX) is another name that’s getting shellacked in Tuesday’s session, down around 10% as I write. Like Fossil, RAX posted massive sales growth (up 68% this quarter) and essentially met analysts’ EPS estimates only to get tanked in the premarket. Yes, Wall Street just really wants to sell today.
The selling gapped RAX down to support at $46 this morning, filling a previous gap that was made back in February. A series of resistance levels overhead make additional downside a more likely scenario for shares of this cloud computing company.
Nearest Resistance: $107
Nearest Support: $98
Catalyst: Earnings “Miss”
Third time’s a charm with Perrigo (PRGO), another stock that’s getting hefty search volume after positive earnings and a selloff in shares. Shares of PRGO are down 5.6% after the firm earned $1.41 per share in profits for its fiscal third quarter. Analysts had been expecting $1.21 per share in earnings.
Like the other names we’ve looked at, PRGO gapped down on the earnings news this morning, popping below a support level that had previously acted as a sort of price floor for shares. The move breaks an otherwise bullish setup that had been forming in shares (but hadn’t yet triggered), which makes more downside the likely move for PRGO. Stronger support at $94 could be a near-term target for the shakeout.
With the increased volatility at play this week, I’d recommend a tight stop.
Nearest Resistance: $47
Nearest Support: $43
Catalyst: Actual Earnings Miss
At least Scotts Miracle-Gro (SMG) is getting sold off for a reason today.
The lawn care company reported a 28% drop in its bottom line for the second quarter of 2012, spurring a 15.8% decline in the firm’s share price at this morning’s open. Scotts’ breakdown is significant not just because it’s a big number but also because SMG took out an extra support level at $47 in today’s session, which sets up a good case for treating SMG like a short candidate at this stage in the game.
If you decide to take this trade, I’d recommend placing a protective stop just on the other side of the 200-day moving avearage.
Nearest Resistance: N/A
Nearest Support: $48
Catalyst: Earnings Win
Not everything’s getting hammered today, though. Vitamin Shoppe (VSI) is rallying 15% on the firm’s positive earnings release this morning. (It was featured yesterday in "5 Stocks Set to Soar on Bullish Earnings.") The firm announced record first quarter profits, taking home 61 cents per share of profits, the firm’s 26th straight quarter of positive sales growth. Just like the support breaks in the other names getting search attention today have bearish implications, a breakout above $48 resistance is a big bullish sign for investors.
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 VSI pushes above today’s high water mark.
Nearest Resistance: $14.75
Nearest Support: $14
Catalyst: Bad Outlook
Electronic Arts (EA) beat earnings estimates with this morning’s numbers, but the firm missed on guidance. That outlook miss is what’s dragging shares down around 5% in today’s trading session. EA has been locked in a textbook downtrend for the last six months, the stock’s swing highs connected by a trend line resistance line that acts as a price ceiling for EA’s price action.
That downtrend is a critical factor for investors to be paying attention to right now. Until that resistance line (right around the 50-day moving average) gets broken, any upside momentum is going to be hard to maintain.
A star candle forming in today’s session does suggest that EA could be set to rebound in the next few sessions, but a retracement to resistance is more likely than a change of trend right now. If you’re looking for a buying opportunity in EA, keep looking.
Nearest Resistance: $95
Nearest Support: $93
Catalyst: Same Store Sales Miss
Last up is McDonald’s (MCD). The fast food giant is getting hefty search volume today after missing same store sales forecasts – even though the miss was conspicuous, investors’ reactions tell just how defensive the Golden Arches are: shares are only down 2.3% on the news. But while the reaction could be much worse given the selling we’re seeing in other names today, even MCD isn’t looking great right now.
That’s because shares have been stuck in a downtrending channel since they topped in the middle of January. At this point, buyers should be looking for basing in MCD; shares are testing support at $93 in today’s session. If MCD can catch a more substantial bid at this price, it could be the start of a leg higher.
As investors get nervous this week, that sort of a move actually makes sense – after all, MCD is a flight to quality stock with recession resistant revenues and a 3% dividend payout.
McDonald's was also featured in "5 Stocks With New CEOs to Stick With."
To see these stocks in action, check out the at Most-Searched Stocks portfolio on Stockpickr.
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.