Fitz Bits: The Shine Is Off of Goldcorp

Today we'll take a look at some reader requests:

• GoldCorp (GG - commentary - Cramer's Take)
• Mercadolibre (MELI - commentary - Cramer's Take)
• Trinity Industries (TRN - commentary - Cramer's Take)
• Gran Tierra Energy (GTE - commentary - Cramer's Take)
• Open Text (OTEX - 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.

Goldcorp had been in a pretty volatile uptrend until breaking down through support in late April. Now that the 50-day moving average is heading lower and the stock is struggling, I'd look to short GG on any move near $40. And I'd then put a buy-stop just above the 50-day moving average. No sense getting caught in a short squeeze if traders start loving gold again.

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Mercadolibre has steadily been moving higher since breaking out of a volatility squeeze in early April. But the subsequent uptrending support line is now at the same level as the most recent breakout -- $53. If you've got lots of profit to protect, why not keep a tight stop on some of your position just below $53. And if the stock falls below $50, then sell some more.

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Trinity Industries has been on a real tear since blowing out of a volatility squeeze between $25 and $28. But that momentum is a thing of the past, and I'd be a seller on any further weakness. The only way I'd buy this overextended stock is if buying pressure is strong enough to push it to a new high. If it does that, the shorts will run to cover.

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Gran Tierra Energy has been flying below the radar for quite a while, as many traders will not trade a stock that's under $5. Well, Wednesday's push above $5 on three times average volume pretty much brought the moths to the flame. Now what?

The stock has run almost 16% in just four days, which just begs for a pullback. I know it's enticing to buy an energy stock that trades for around $5 -- but losing a buck is a 20% loss. My first rule of trading is simple: "Don't lose your dough." Well, don't! If you like the company, it's not going anywhere -- just be patient and wait for a better entry.

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OpenText had been struggling to break through $35. Well, it finally got that job done in late April ... on extreme volume. But it wasn't a "blow-off top" because the stock has moved higher. But after Wednesday's price pattern -- a pop up above Tuesday's close, a move above Tuesday's intraday high, and then a close below Tuesday's intraday low -- the advantage has definitely swung from the bulls to the bears. Now, any further weakness will probably find some support at $35 -- but that's $2 down ... and the stock is just $37. That's too much room for me. I'd rather sell on a breakdown below $37 and then be poised to buy lower if the stock firms up.

Be careful out there.

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At the time of publication, Fitzpatrick had no positions in the stocks mentioned, 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.