Fitz Bits: Suspicious of Chevron

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

• Chevron (CVX - commentary - Cramer's Take)
• MEMC Electronics (WFR - commentary - Cramer's Take)
• Petroleo Brasileiro (PBR - commentary - Cramer's Take)
• CPFL Energia (CPL - commentary - Cramer's Take)
• Skyworks Solutions (SWKS - 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.

Chevron has been volatile and has morphed from an uptrend to some sideways churning. The low is down around $95, while I'd look at the May peak as current resistance. That's a really wide spread, and I'd only be comfortable buying right at support. And until CVX pushes to a new high, I'd be suspicious of the uptrend and would instead be looking to sell on the rally.

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This weekly chart of MEMC Electronics shows a new series of lower highs since the $95 peak in December. The 10- and 40-week moving averages are synonymous with the key 50-day and 200-day moving averages. Notice how they are crossing. That's a bad thing. While short-term support was at $65, longer-term support is down at $60. The former has already broken down; the latter is about to be tested.

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Petroleo Brasileiro had a monster run, from $47 up to $77 in just a couple of months. The stock has retraced 38.2% of that move (my nod to the Fibonacci gods) and is near the 50-day moving average. If you've been looking for an entry on this stock, here's your chance. I'd be a buyer now, with a stop just below the 50-day moving average.

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Over the past couple of months, CPFL Energia has been bought on each pullback to $67.50. But Wednesday's weakness took the stock through that level and sets up a continuation of the reversal that began in early May. This is a thinly traded stock, so I'd never consider shorting it. But I sure wouldn't be a buyer.

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Skyworks Solutions has been on a tear since mid-May, advancing about 25% since the May low. While the past couple of days have been weak, the stock remains above the eight-day exponential moving average. I'd stay long until that changes.

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.