Fitz Bits: Solid Signal for NYX

Today we'll take a look at some reader requests:

• NYSE Euronext (NYX - commentary - Cramer's Take)
• The Philadelphia Semiconductor Index (SOX)
• Terex (TEX - commentary - Cramer's Take)
• ReneSola (SOL - commentary - Cramer's Take)
• BluePhoenix (BPHX - 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.

---

NYSE Euronext had been trading within a $5 range for over a month before breaking above $70 yesterday on heavy volume. This is a classic "volatility expansion," and a pretty reliable buy signal. But it's also risky to buy after the stock has run more than 7% on almost 3 times average volume.

I'm not into fortune-telling, so here's what I'd do: If you're long, try using a protective stop back in the high $60s. If the stock falls back that low, there are going to be a lot of unhappy Tuesday bulls who are losing money. If you're looking to buy, try buying as close to $70 as possible. It looks to me like NYX will go higher from here, but I suspect it won't be in a straight line.

---

The Philadelphia Semiconductor Index had been forming a base during the first quarter of 2008. But the bulls began a new push in early April, and the semiconductor index has been on the move ever since. If you're looking for some diversification away from energy and basic materials, think about the semiconductor space.

---

Take a close look at this daily chart of Terex -- what do we see? We see a stock that was trading below the 50-day moving average into January, and then began trading above the 50-day moving average after February. This is a textbook trend reversal that begs for more continuation. I'd still be a buyer, even on this breakout. But I'd also keep a protective stop just below the 50-day moving average.

---

ReneSola is a fairly new issue that only began trading in late January. But the stock is very close to hitting a new high around $19 after a brief pullback to the 20-day moving average. So far, the pattern of higher highs and lows is intact, indicating eager buyers who seize on any weakness as an opportunity to buy. Piper Jaffrey has a $25 price target on this stock, and from the looks of the price action, I think it's a bull's-eye.

---

BluePhoenix had been trading in a very tight range during April. But last Friday, the company announced great first-quarter earnings and also raised guidance. As a result, the stock gapped right above the resistance line at $10.

Over the past couple of days, though, that gap has been closing as the stock pulls back to test the breakout. If you're a fan of BluePhoenix, your buying opportunity awaits -- with a stop at around $9.

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.