Today we'll look at some reader requests:
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.
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 time frames for different things, otherwise your actions will largely be a function of your emotions.
Foster Wheeler has fallen so far below the 200-day moving average that it's just begging to be bought. We saw the bulls charge in yesterday on very heavy volume. That marked the end of the line for the bears. So the path of least resistance is upward. But how far can FWLT go before hitting selling pressure? Probably not too far. I'd be a buyer here, but only with a tight stop below $33.50. If the stock falls back that far, the bounce is over. And if the stock hits $45, I'd certainly take my profits.
Freeport-McMoRan looks a lot like Foster Wheeler -- an oversold bounce after a gut-wrenching decline. The upside target is pretty well defined around $75. That makes this a 50/50 trade -- risk $5 to make $5.
If you're thinking of buying the
SPDR Gold Trust ETF on the current weakness, zoom out to this weekly chart. Notice how this ETF has completed a major top? I'd stand aside and wait for the mid-2007 breakout to be tested. That's where I'd look for some buyers to be hanging out.
The U.S. dollar has been on fire for the past couple of months, and isn't really showing signs of letting up. Look at the
PowerShares U.S. Dollar ETF. This bullish tracking fund is running along the upper Bollinger Band on some pretty impressive volume. But when things look the brightest, it's often time to look for an umbrella. I'd keep a tight stop on this one. Don't believe the hype about the dollar -- we're just the best of the worst because our economy tanked before everyone else's did. Keep it for a trade only.
This weekly chart reveals
Owens-Illinois for what it really is -- a stock that's completing a major trend reversal. While OI may be ready for a countertrend bounce, I'd be a seller on any move back to $40.
Be careful out there.
Ever wish you had a chance to meet Jim Cramer, James "Rev Shark" De Porre and Vince Farrell? What would you ask them about their investing strategies or aligning your portfolio for 2009? You'll get your chance at a TSC conference on Oct. 25, in New York City. Please click here to email us for more information.
Dan Fitzpatrick
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