Treat Rallies as Sell Opportunities

AmSouth

AmSouth (ASO:NYSE) Buy

Source: Metastock

Five days ago, AmSouth's (ASO - commentary - Cramer's Take) stock moved upward with impressive volume, penetrating resistance. It pulled back on lighter volume and now has started to strengthen again. The two moving-average lines have crossed to the positive side. This is the first time in months that the volume has increased rather than decreased on an upward move. It is a sign of strength that suggests higher prices ahead.

Station Casinos

Station Casinos (STN:NYSE) Short

Source: Metastock

After a long advance, Station Casinos (STN - commentary - Cramer's Take) gapped to the upside on heavy volume but then could not continue the move. Instead, it produced a series of three very square entries on the Equivolume chart. That suggested the gap was an exhaustion gap, and that the stock was encountering very difficult resistance. That led to the downturn that we have been in ever since. It looks as though it has further to go.

Smith International

Smith International (SII:NYSE) Short

Source: Metastock

Volume is coming in on the downside of Smith International (SII - commentary - Cramer's Take). It broke an important support level about two weeks ago, which now suggests it is going to go lower. Also, the two volume-adjusted moving-average lines are crossed to the minus side. The recent rally has been on lighter volume, and now it appears to be starting to weaken again.

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Richard Arms is a renowned stock market technician who invented the Arms Index (often referred to as the TRIN), which has become a mainstay of market analysis, appearing in The Wall Street Journal and Barron's. Arms also developed the widely used technical method Equivolume Charting. Since 1996, he has been publishing the Arms Advisory newsletter for money managers and financial institutions. He also has authored four books, including Profits in Volume and Trading Without Fear, and has been honored with the Market Technicians' Award for Lifetime Contribution to Technical Analysis. At the time of publication, he had no positions in stocks mentioned in this report, although holdings can change at any time. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks.