Indicators Suggest More Upside Ahead

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Sun Companies: Buy

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Source: MetaStock

Many of the oil and gas refining and marketing companies continue to look better than the majority of stocks. In addition to a number of others mentioned recently, Sun Companies (SUN - commentary - Cramer's Take) might be considered for buying. Coming off the October low, we have a series of ascending bottoms. Earlier this month, it broke out through a prior resistance level, and it did so with increasing volume and a widening trading range. Notice the small downward sloping flag forged last week. It has now gone through the upper line of that flag, indicating a resumption of the advance. I see the stock as a buy around current levels.

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Southern Co.: Buy

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Source: MetaStock

I continue to like the looks of the electric utilities' charts. Here is another that appears ready to move higher. Even with the bear market of the last year, Southern Co. (SO - commentary - Cramer's Take) is not far from the price it was at a year ago. The consolidation of the last six weeks has consisted of ascending lows and a flat top. It has broken out through the resistance with better volume, and then pulled back a little. Now it is strengthening again and seems to be starting a new advance. I think it could be bought around this price.

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Petmed Express: Short

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Source: MetaStock

All the way down, Petmed Express (PETS - commentary - Cramer's Take) has ignored the market and gone higher. Now, though, it appears to be running out of steam. We have had three weeks of sideways action on heavy volume, suggesting it has run into heavy overhead supply. The decline three days ago broke the ascending trendline, and the MACD, across the top of the chart, has crossed to the negative side. This stock looks as though it could be sold short around current levels, with a stop order above the old highs as a protection.

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Please note that due to factors including low market capitalization and/or insufficient public float, we consider PetsMed to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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Know what you own: Arms mentions Rayonier. Other companies in the diversified REIT space include Plum Creek Timber (PCL - commentary - Cramer's Take), Douglas Emmett (DEI - commentary - Cramer's Take) and Duke Realty (DRE - commentary - Cramer's Take).

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At time of publication, Arms had no positions in the stocks mentioned.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider PETS to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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 Stop and Make Money: How to Profit in the Stock Market Using Volume and Stop Orders, Profits in Volume, Volume Cycles in the Stock Market, Trading Without Fear and The Arms Index, and has been honored with the Market Technicians' Award for Lifetime Contribution to Technical Analysis. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Richard appreciates your feedback; click here to send him an email.

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