Fitz Bits: Boeing's Tailspin Continues

Today we'll look at some reader requests:

• Boeing (BA - commentary - Cramer's Take)
• Petrobras (PBR - commentary - Cramer's Take)
• Skyworks Solutions (SWKS - commentary - Cramer's Take)
• Schering-Plough (SGP - commentary - Cramer's Take)
• Pfizer (PFE - commentary - Cramer's Take)

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" 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.

3 Stocks I Saw on TV

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 timeframe 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 timeframes for different things, otherwise your actions will largely be a function of your emotions.

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This extended weekly chart of Boeing shows how the stock peaked in mid-2007 with a double top and then began trading below the 200-day moving average. While this has been one choppy ride, the trend has been down. We're too late to short, but there's no point in buying unless you know something I don't. Trends often last longer than most rational folks believe they will. Don't be rational -- be careful.

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Petrobras has been churning for the past month, and the 50-day moving average has been advancing up to meet the price. Now we've got a stock that's fallen below that key moving average, and I'd look for some support at around $62.50. Why there? Because that's where a lot of trading has taken place, as illustrated by that long horizontal "volume by price" bar. If the stock falls below that level, then I'd be looking for the next line in the sand down in the mid-$50s.

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Skyworks Solutions has been pretty darned volatile during the last few months, but the stock continues to hang tough just above the 50-day moving average. If that key average fails to define support, I'd close out the trade and move on.

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Schering-Plough has been trading between $19 and $21 for the past couple of months, with the occasional dip down to around $18. If you're thinking about buying at $20, keep in mind that you could have bought at $20 back in mid-May and would have been able to improve on that entry quite a bit since then. Here's my point -- why be a buyer now when the stock is basically locked up? Better to wait for a breakout above $21. Sure, you've given away some upside. But you've kept time on your side and haven't gotten stuck in a rangebound stock.

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The pretty colors on this daily chart of Pfizer illustrate a few points. First, the yellow box defines the current sideways trading range. The blue circle highlights how tightly the Bollinger Bands are squeezed together. When volatility is that low, there is bound to be some fireworks -- we just don't know the direction. The prevailing trend is down, so my bias would be bearish. I'd sell on a break below current support. But if the stock instead breaks out to the upside, I'd consider buying it, but only if that breakout took the stock above the 50-day moving average, which has defined resistance for all of 2008.

Be careful out there.

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At the time of publication, Fitzpatrick was long Petrobras, though positions may change at any time.

Dan Fitzpatrick is the publisher of StockMarketMentor.com, an advisory newsletter and educational forum dedicated to teaching effective risk management and trading methodologies to aspiring traders and investors. He is a former hedge fund manager and a member of the Market Technicians Association, and he now trades from his home in San Diego, Calif. While Fitzpatrick holds various securities licenses, he does not give recommendations to buy or sell stocks. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. He appreciates your feedback; click here to send him an email.