Fitz Bits: Two Entries for ExxonMobil

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

• ExxonMobil (XOM - commentary - Cramer's Take)
• Alcoa (AA - commentary - Cramer's Take)
• China Medical (CMED - commentary - Cramer's Take)
• Baidu (BIDU - commentary - Cramer's Take)
• Rubicon (RBCN - 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.

---

ExxonMobil has fallen away from the 2006-2007 uptrend and is now in a wide sideways consolidation. As I see it, there are two alternative long entries (memo to myself: Don't even think about shorting an oil stock in this environment). First, a pullback to around $80 puts you in right at established support. Alternatively, a breakout above $95 could start the next leg of a multiyear uptrend.

---

This daily chart of Alcoa shows a stock that had been unable to push above $39 despite repeated buying sprees by the bulls. That dynamic ended in early May when the stock moved all the way up to $44 before pulling back to test the breakout. So now where are we? I wouldn't buy Alcoa now, because it's advanced nearly 10% in just two days. As such, I think it's short-term overextended and due for a pullback. Instead, I'd wait for the next pullback and try to buy near $40.

---

China Medical has fallen below a key support line. As such, I'd just stay away from this one until the bulls make a stand. Even then, you've got to expect any rally to $36 to be met by many traders who are still holding the stock, just wanting to get their money back if CMED moves up to their entry point.

---

Baidu has slowly been rolling over and is printing lower lows and lower highs. Yesterday's price action may have established a short-term bottom, but the stock is still under pressure. I'd sell if the bears can push BIDU below yesterday's intraday low.

---

Rubicon is in a downtrend and continues to make a series of lower highs and lows. The stock trades pretty thin, which is why I absolutely would not be interested in shorting it. Never short thin stocks! Instead, I'd watch for a move above $24 -- and I'd be a buyer.

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.