Fitz Bits: MASI Pops After Volatility Squeeze

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

• Masimo (MASI - commentary - Cramer's Take)
• Goodrich (GR - commentary - Cramer's Take)
• Flir (FLIR - commentary - Cramer's Take)
• Lockheed Martin (LMT - commentary - Cramer's Take)
• Precision Castparts (PCP - commentary - Cramer's Take)
• Allis-Chalmers Energy (ALY - commentary - Cramer's Take)
• Itron (ITRI - 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, Dec. 14

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 timeframe over another. I differentiate between these timeframes in pretty simple terms.

The longer timeframe -- the weekly bar chart -- is my "decision" timeframe. 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" timeframe. Once a decision is made on the basis of the weekly timeframe, then we zoom in on the daily chart to choose that level at which action is taken. The daily timeframe 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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I've been routinely covering Masimo since Jim Cramer first mentioned it a few months ago on "Mad Money." MASI continues to move higher and has just broken from a volatility squeeze. But if you're long, there's no reason to change that stance -- I think it goes even higher. And if you're looking to buy, try waiting for a bit of a pullback.

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As long as this channel holds up, Goodrich is still a buy on dips.

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Flir is showing the same tendency that GR is showing -- repeated bounces along the 50-day moving average. Over the past couple of days, FLIR has fallen below that level. I'd wait for a close back above the level before buying.

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Lockheed Martin has been in a volatility squeeze for a while but is close to breaking out. Try waiting for a move above $112.50.

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This weekly chart of Precision Castparts shows a very strong stock that is just resting. The lowest-risk buying point would be a pullback to the 30-week moving average. But another way to go is to buy strength on a breakout above current resistance. Either way, start small and build your position slowly.

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This weekly chart shows Allis-Chalmers Energy bouncing off the early 2007 low. The stock has been making a series of higher highs and lows, though the recent pullback could be the first sign that this pattern is faltering. Still, it's at a good entry level; I'd keep a stop below support.

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Itron imploded in early November and has yet to fill the gap. There is a lot of pain in this chart, and I think there are better trades out there. But if you really like ITRI, at least try waiting for the stock to enter the gap. It can't start filling it until it gets there. With so many unhappy shareholders who bought from higher levels, that could take a while.

Be careful out there.

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