Fitz Bits: The Time Might Be Now for FWLT

I heard from a reader who wanted my technical take on some stocks that Jim Cramer has been high on lately, so today we'll take a look at:

• Foster Wheeler (FWLT - commentary - Cramer's Take)
• McDermott (MDR - commentary - Cramer's Take)
• Jacobs Engineering (JEC - commentary - Cramer's Take)
• Chesapeake Energy (CHK - commentary - Cramer's Take)
• Anadarko Petroleum (APC - commentary - Cramer's Take)
• Mosaic (MOS - 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.

Foster Wheeler is in a sideways trend at the upper right corner of the chart. Such sideways churning is typically a healthy development for a stock, and this is no different. With FWLT right at support, this might be a good buy now.

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Mcdermott seems to be printing a series of lower highs and lower lows. This is troublesome for the bulls because each successive low makes it tougher and tougher for the stock to reach prior resistance. That makes it increasingly more likely that the stock will roll over. As you can see, that's exactly what MDR is doing now, with the middle Bollinger Band now starting to act as resistance and not support. I'd require a breakout above $60 before buying. But if the stock instead pulls clear back to $40, I'd also be a buyer for a different reason -- an oversold bounce.

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Jacobs Engineering broke below its uptrending channel in early January. Since then, the stock has been consolidating at lower levels, but has also struggled to surpass the 50-day moving average. I'd steer clear of this stock until the bulls can push it back above that key moving average ... unless the bears push it all the way down to prior support at $70. Then I'd buy.

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Chesapeake Energy is consolidating a pretty dramatic run up from $35 to $46 in just about a month. But Thursday's weakness closed right at support. That means that any further weakness puts the prior breakout ($41) back in play. I'd be careful about buying right now and would rather give the stock a chance to rest.

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Is Anadarko Petroleum putting in a double top? Too soon to tell -- after all, the stock is just nearing the December high, but has not yet failed. Instead, we're just seeing a bit of consolidation between $64 and $66.

But APC is not in at an ideal buy point right now. If we buy at $64, the stock can fall all the way down to $54 before we really get a test of solid support. Sure, we could put an arbitrary stop down at the 50-day moving average, or down around $60, but what's the point in that? I'd rather wait for the stock to pull back to a better entry point, or prove itself with a breakout above $68.

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Mosaic continues to impress. Notice how the 50-day moving average continues to run higher, with just an occasional tag by the bears. First, any pullback to the 50-day moving average would be a great buying opportunity. Second, if the stock breaks above the resistance line I've drawn, then I'd also be a buyer.

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.