Fitz Bits: From Goat to Hero to Goat

Today we'll look at some reader requests:

• Financial iShares (IYF - commentary - Cramer's Take)
• iShares China (FXI - commentary - Cramer's Take)
• DuPont (DD - commentary - Cramer's Take)
• Market Vectors Agribusiness (MOO - commentary - Cramer's Take)
• Dow Jones U.S. Steel Index
• Nucor (NUE - 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.

Financials were last month's goat, last week's hero ... and are now likely to be this week's goat! I'd be patient here and wait for the pullback to run its course. If the Financial iShares bottoms at a higher level than the July low, that would be my signal to start dipping a toe into this sector. And even then ... only for a trade!

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Remember China? Last year we were like China bulls in a closet! But over the past several months, the FXI has taken a real beating as enthusiasm for China has waned. Well, the recent July low is higher than the March low, lending credence to the bull argument that China is now buyable. I wouldn't be a buyer now ... but I'd sure look for an entry point on any pullback closer to $120.

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DuPont has been beaten like a jailhouse stool pigeon. Each time the stock rallies to the resistance line drawn above, sellers drive the stock lower. Until that dynamic changes, I'd stay away from DD.

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Market Vectors Agribusiness is in a downtrend after breaking down from a May-June volatility squeeze. I'd look at the 200-day moving average as current resistance on this new ETF. And even then, if MOO breaks above $57.50, it'll still face a lot of selling pressure from those who failed to sell before the breakdown at $60. Bottom line: MOO will have a tough time chewing through all that resistance. If you're an agribusiness bull, be patient!

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The Dow Jones Steel Index had been a stellar performer earlier this year. But the uptrend gave way to sideways churning in May, and now steel is bending under heavy selling pressure. The current action is still bearish, as lower highs and lower lows are being formed. Until the steel index starts trading higher, I'd stay away from steel stocks.

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Nucor doesn't look much different from the Steel Index, does it? Sideways congestion leading to a breakdown ... leading to another bout of sideways congestion. Well, we're now looking for support around $57.50. If the bulls push it lower than that, I'd sell.

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.