Fitz Bits: Monster Roars

OK, let's look at some charts. Monster Beverage (MNST) Home Depot (HD) Verizon (VZ) Exco Resources (XCO) Direxion Daily Financial Bull 3X Shares (FAS) 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 I Saw on TV 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 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. In late April, Monster Beverage blew from $65 up through $80 on a rumor that it was going to be bought by Pepsico (PEP). But that rumor turned out to be unfounded. So did the stock start falling as disappointed investors started dumping the stock? Nope -- instead, the prior uptrend has been maintained with almost boring regularity. In light of this, I'd suggest buying Monster on any pullback to support. Currently, that's around $70. This daily chart of Home Depot illustrates how difficult it is for an uptrend to be maintained after a big break of an existing trend. Here, the stock had been trending along the 20-day moving average, having moved from $42 up to $53 in just four months. But, after a high-volume break of the 50-day moving average, Home Depot is struggling to break through $50. If this stock is unable to push to new highs, then I'll interpret the early May high to be a top. So watch how Home Depot acts if and when it does test $52. Any pullback from that level would be a signal to short. This weekly chart of Verizon shows a multi-month consolidation between $38 and $40. If you just looked at the trading volume in mid-March, you'd think that Verizon were printing a top. Why? Volume was well above average during a pullback between $39 and $40. However, that distribution turned out to be a golden opportunity to buy the stock. Now that Verizon is up 10% from the last buy point, it's just not at a good entry point. Instead, try waiting for a bit of a pullback to around $40. That's when I'd buy. Exco Resources is one of the few energy stocks that's showing some signs of life. This stock has been bumping up against $8 for most of this year, but has been unable to break through. Still, the stock is now bouncing along the 50-day moving average -- which is now trending higher. With rising support, it's really just a matter of time before Exco breaks out. The best buying opportunity would be on a pullback to retest the 50-day line. So if we see a bout of market weakness that takes XCO down to test the moving average, buy the stock. The financial group appears to have bottomed -- it's certainly printed a trading low. What do I mean by that? Well, Direxion Daily Financial Bull 3X Shares (FAS) has got a defined low of around $75, and that enables us to define risk. The FAS is now $8 above that level, and about $8 below presumed resistance at $95 (which is prior support that was broken in early May). This gives you a 1:1 risk:reward profile. But if you're bullish on the financial sector, this is still a good trade. Just make sure you maintain some risk control on this leveraged ETF. Be careful out there.

Fitz Bits: Monster Roars

The stock has shown undeniable resilience, so I'd pick up shares on a pullback to this level.

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