RealMoney Silver - Fitz Bits: PCU Is Testing $100

Fitz Bits: PCU Is Testing $100
By Dan Fitzpatrick
RealMoney.com Contributor
11/20/2007 8:59 AM EST

Today, we're going to take a look at the following stocks:

Southern Copper (PCU)
Companhia Vale do Rio Doce (RIO)
Moody's (MCO)
New Oriental Education and Tech (EDU)
Ctrip (CTRP)
CB Richard Ellis (CBG)
Aegean Marine Petroleum Network (ANW)

Each day, I'm featuring several reader requests for the current technical take on a stock. I can't assure you that I'll get to yours, but I will certainly make every attempt to do so, as long as the stock meets the following criteria.

1. The average daily trading volume needs to exceed 250,000 shares. If a stock trades too thinly, chart analysis doesn't help much, because there just are not that many traders involved. One big buy or sell order can move the stock in ways that chart analysis just cannot predict. So let's stay above 250,000 daily shares.

2. The stock really needs to be trading above $5. Sub-$5 stocks don't get the same treatment by institutions and portfolio managers. Also, many traders set their trading screens to ignore stocks below $5 just to cut down on their trading candidates. While I'm sure your favorite penny stock is the next undiscovered gem, I'm not in the business of breaking news stories ... so once your gem is discovered, let me know, and I'll take a look at the chart.

3. Make sure you check my recent "3 Stocks I Saw on TV" videos. I don't want to be too redundant, so if I've recently covered a stock in video format, I won't repeat it here.

Hopefully, you've noticed that I alternate between daily and weekly bars in the charts. It's important to understand the underlying rationale for choosing one time frame over another. I differentiate between these time frames in pretty simple terms.

The longer time frame -- the weekly bar chart -- is my "decision" time frame. I want to remain in phase with the trend, and I use the weekly bar chart to identify the trend. So I'll feature a weekly chart when I want to emphasize a certain aspect of the prevailing trend -- not a specific buy or sell point. This weekly chart is the time frame in which I make my decision: Do I want to buy or sell the stock?

The daily chart is my "action" time frame. Once a decision is made on the basis of the weekly time frame, then we zoom in on the daily chart to choose that level at which action is taken. The daily time frame is my preferred frame of reference for actually implementing the decisions I've made on the weekly chart.

In your own analysis, make sure you are using different time frames for different things, otherwise your actions will largely be a function of your emotions.

With Southern Copper right at support, this could be a great buying opportunity ... or the last chance to sell before a bigger decline. I'd keep the stop just below $100.

Companhia Vale do Rio Doce is hanging in there pretty well, with the stock just at the 50-day moving average. Also, $32 has been tested a couple of times over the past month and held as support. So I'd keep a stop just below $32. If that breaks down, we could see $26.

Moody's had been in a steady uptrend until last April. That's when the wheels came off. The long volume-by-price bar at around $25 marks the next logical support level. Until that level is tested, I'd stay away.

New Oriental Education and Tech has retraced more than half of its move since the September breakout. I'd watch $70 closely. A break below that level would flush out a lot more sellers.

Ctrip remains in an uptrend. I'd use the 30-week moving average as a reference for putting stops ... and for buying pullbacks. That's $10 below current levels.

CB Richard Ellis cut right through prior support like a hot knife through butter. The next level of support could be around $15, which is where the stock consolidated back in late 2005.

Aegean Marine Petroleum Network has been holding up pretty well along the 50-day moving average. This stock is fairly thin, so we could see a big bout of selling on any decisive break of the 50-day moving average. And that could take the stock clear down to the breakout level of $22.50 -- not a prediction; just a possibility.

Be careful out there.