This semiconductor industry and chart commentary by Dan Fitzpatrick originally appeared on RealMoney on Dec. 22.
Today we'll look at some reader requests:
- Semiconductor HOLDRs (SMH) - Get Report
- MEMC Electronic Materials (WFR)
- Canadian Solar (CSIQ) - Get Report
- Yingli Green Energy (YGE)
- eBay (EBAY) - Get Report
Each day, I'm featuring several reader requests for the current
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.
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.
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.
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.
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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 time frame 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.
Bulls are always emboldened when financials and technology stocks are working. Well, many financial stocks are firming up. But what about technology? Check out the
. After breaking out of a four-month trading range in early December, SMH consolidated in a very tight range on average volume. Yesterday's breakout starts the next leg higher, and I'd consider $26.50-$27 as support. As long as SMH remains above that level, I'd stay long. I think SMH goes higher.
After three bounces off $12,
MEMC Electronic Materials
is about to reverse a really nasty decline. As long as the price remains below the 50-day moving average, this is still just a "potential" reversal. I'd be patient and look to buy closer to support. But a breakout above the 50-day moving average puts WFR in rally mode.
This daily chart shows
moving higher in a series of higher highs and lows. The move that began in mid-November continues unabated. I've used a 10-day exponential moving average as a reference for stops, but that's not a magic formula. Rather, it is just one way of keeping you honest. If you're long, you've got to have a metric for letting the position run without risking giving too much profit away on a pullback. As long as CSIQ continues printing higher highs, I'd stay long.
The weekly chart of
Yingli Green Energy
shows a stock that has been consolidating for quite a while. But over the past few weeks, the bulls have been pushing the stock out of the top of the range. The one troublesome issue is volume. Over the past couple of weeks, we've seen declining volume accompanying the advance. That indicates lackluster interest at current levels, and it is likely to lead to more consolidation. So don't be in too much of a hurry to buy now. You can probably get it a bit closer to $14.50-$15.
hasn't really been enjoying the holiday season very much. The lower high in late November was an obvious warning sign to the bulls. But if you're still hitting the "buy" button on EBAY, I'd suggest remaining vigilant as the stock tests $22. If that level breaks down, there isn't too much evidence of support in this chart.
Be careful out there.
At the time of publication, Fitzpatrick had no positions in stocks mentioned, though positions may change at any time.
Dan Fitzpatrick is the publisher of
, 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;
to send him an email.