Cemex Still Churning

Today we'll look at some reader requests:

• Cemex (CX - commentary - Cramer's Take)
• Insituform Technologies (INSU - commentary - Cramer's Take)
• U.S. Oil Fund (USO - commentary - Cramer's Take)
• iShares Dow Jones U.S. Financial Sector ETF (IYF - commentary - Cramer's Take)
• U.S. Dollar Index

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.

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.

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Cemex continues to churn right around the 50-day moving average. But after almost tripling in price since the November low, a pause in the uptrend is overdue. The next buy signal is on a rally that actually manages to close above $10.

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This weekly chart of Insituform Technologies shows the very wide trading range for this construction company. But with the stock right at the top of the channel, this is a time to take profits rather than buying. But if the bulls do manage to push the stock out of the current $6 channel, then I'd consider buying, with a protective stop just below current resistance. Alternatively, if the stock falls back down to support, you buy the pullback with a stop below support. Either way, you want to define your risk before you make the trade.

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I've simplified this chart to illustrate just how far below the mean U.S. Oil Fund is. With this ETF currently almost 60% below the 200-day moving average, the bulls are overdue to take this stock higher. But the downtrend remains intact so long as the 20-day moving average continues to cap any rallies. As such, I'd sell into strength -- whenever the bulls decide to flex their atrophied muscles.

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The financials are not helping this market. Notice how, unlike the major indices, the iShares Dow Jones U.S. Financial Sector ETF is well below its 50-day moving average. This is a sign of weakness that doesn't bode well for the bulls. Common wisdom dictates that the market cannot move higher without the financials. Do you know why that rule is so common? Because it's true! Until we start seeing the IYF perk up, this market is to be avoided. Sorry, bulls.

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The U.S. Dollar Index became grossly oversold last week and is now enjoying a mild bounce. But notice how the last four days of advances has been capped at around 82? That's compelling evidence that upside momentum is now flat. And even if the dollar does break above 82, the prior support at 85 will come back into play with the probable outcome being another lower high ... and a resumption of the downtrend.

Be careful out there.

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At the time of publication, Fitzpatrick was long Cemex, 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.