Monday Gave Us a Convincing Breakout

(To do my Equivolume charting, as in the charts that appear in this column, I use a charting program called MetaStock. To learn more about this method, read my series of columns, Trading With Equivolume.)

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Oracle: Cover Shorts and Buy

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Source: MetaStock

Oracle (ORCL - commentary - Cramer's Take) was suggested as a short sale on Sept. 3. That was followed by a suggestion to cover shorts and go long on Nov. 13. Now it has broken the descending trendline, reinforcing the contention that it is headed higher. The MACD has crossed to the buy side, and the two volume-adjusted moving average lines are about to do the same. It is working off a wide and solid-looking base, suggesting a good advance. I think it could be bought around this level, rather than waiting for a pullback that may not materialize in such an oversold market.

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Ecolab: Buy

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Source: MetaStock

Ecolab (ECL - commentary - Cramer's Take) appears to have put in a solid base. It had a very square Equivolume entry on the early November low, indicating heavy volume but strong support. That low was tested on lighter trading about two weeks later. The advance from there was on heavier trading and a widening of trading ranges. After a typical light-volume flag pullback, it has again strengthened, and looks as though it is headed higher. It looks like a buy around current levels.

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Imperial Oil: Sell

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Source: MetaStock

Imperial Oil (IMO - commentary - Cramer's Take) lost over half its value between May and October. It made a square climactic low with the markets in October and has moved sideways from there. Recently it moved up on better volume and then pulled back in a typical descending flag. In the last two days it has penetrated the upper limit of that flag, which I have labeled as the buy line. That tells us the stock is likely to move higher, and it suggests buying the stock around this level.

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Know what you own: AT&T's competitors include Qwest (Q - commentary - Cramer's Take), Sprint Nextel (S - commentary - Cramer's Take) and Verizon (VZ - commentary - Cramer's Take).

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

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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