Fitz Bits: Two Ways to Buy MOS

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

• Mosaic (MOS - commentary - Cramer's Take)
• Activision (ATVI - commentary - Cramer's Take)
• Deere (DE - commentary - Cramer's Take) ETF
• Elan (ELN - commentary - Cramer's Take)
• Timberland (TBL - commentary - Cramer's Take)
• Stillwater Mining (SWC - 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.

---

The last time we looked at Mosaic was back in late December when the stock was consolidating around $82. I noted that the next buy signal was on a breakout above $85, though the safest buy point would be on a pullback to the 50-day moving average.

Well, it turns out that both of those scenarios played out. The day after my piece, the stock popped up above $85 on the way to $110. After that, it fell clear back to the 50-day moving average, where plenty of buyers were waiting with open arms.

So where are we now? I've got the same analysis. If the stock breaks above current resistance at $100, I'd be a buyer. But if it pulls back to the 50-day moving average (currently at around $87), I'd also buy.

---

I've been getting a lot of questions about Activision, so here's my take. The stock gapped up on strong earnings back in late December. Since then, the new support level has held up nicely and the stock is now bouncing off the 50-day moving average. Still, plenty of supply looms overhead from all those eager bulls who bought the mid-December breakout above $27 and now wish they hadn't. So as the stock climbs up toward $30, look for it to be slow going. I'd use a protective stop down below $25. The only way that stop gets hit is if the uptrend ends.

---

This weekly chart of Deere shows a stock that just won't quit. While we saw a nasty correction last month, the stock continues to print higher lows and is consistently above the 30-week moving average. I view this consolidation as healthy, particularly since the stock is now higher than the high-volume selloff that occurred in early January. Why? Because the only way that could happen is if all the aggressive sellers are finished. While there remains some resistance from the "I just want my money back" crowd who bought between $85 and $95, I think the stock will move higher from here.

---

This daily chart of Elan is rough to read. The stock has been all over the place, but is generally trending higher. Notice how the 50-day moving average is in an uptrend, and the stock is making higher highs and higher lows. I'd watch for a breakout above $26 now, with a stop just below current support.

---

Timberland is trying to find a bottom at $15. The stock has been pounding away at that level since November and money flow is starting to perk up. I've drawn two trading scenarios. First, a buy right now, with a tight stop just below support, and a price target of $20. Second, stand aside and wait for a breakout above $20. The problem with this second scenario is that you've got to watch the stock climb more than 30% before you even act.

---

After bottoming at about $7.50 in January, Stillwater Mining has doubled. That's a big move in a short period of time, with just one short period of consolidation in late January. It's always tough to ride these rocket ships for as long as possible without risking getting caught in the inevitable reversal. Try using an 8-day exponential moving average as the basis for stops. If the stock closes below that, it's probably time to take the trade off the table.

Be careful out there.

---

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.