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Today we'll look at the following reader requests:
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 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.  JDS Uniphase had been getting crushed until early February, when the stock gapped above the 50-day moving average. Since then, this key moving average has been serving as support on any pullbacks. I think it's too late to buy JDSU right now -- it's just too far above established support. But if the bulls can manage to push it above resistance, I'd consider buying some, with a stop back in the congestion area.  This weekly chart of Yamana Gold shows a stock that continues to move higher, albeit in a volatile environment. Last week's haircut brought the bulls back down to earth ... and down to test the last breakout level. If the stock closes below $15, I'd be a seller.  General Electric had been bumping up against the 50-day moving average for the past few months, but last week's fireworks provided the magic needed to break the downtrend. Now, I'd be a buyer on pullbacks.  Foundation Coal has been in a pretty wide trading range over the past few months. I've drawn a tentative support line connecting the November low with the January and March lows. If FCL falls below Thursday's intraday low, though, then this support line just doesn't mean anything. After all, it takes at least three points to create a valid trend line. Fewer than that just gives you the shortest distance between two points.  Enterprise Products had been finding buyers at $29.50 until last week. Even in January when that support level broke down, the stock corrected itself by the end of the day. But last week, $29.50 didn't have the same magic. Instead, the stock fell through that level and never looked back. But in light of Thursday's dramatic recovery and close near the top of the wide ranging day, I'd be looking for a move higher ... to around $29.50. If the bulls push it that high, watch for selling pressure by those folks who just want their money back.  PowerShares DB Agriculture has been a crowd favorite for many months. But the stock really peaked in February and went on to form a double top in mid-March. Now the uptrend has been decisively broken as the bears have pushed the stock well below the 50-day moving average. While DBA might ultimately turn out to be a great buy one day, I don't think today is that day! I'd wait for evidence of persistent buying before trying to catch this falling knife. 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.
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