It May Be Time to Get Long

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Cabela's: Buy

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Source: MetaStock

Cabela's (CAB - commentary - Cramer's Take) was suggested as a short in May of last year when it was at almost twice its present price. Now the long slide appears to have ended, and an advance started. It has broken up through the descending trendline and has gone through two key resistance levels with better volume.

The moving average convergence/divergence (MACD) across the top of the chart has gone positive, and so have the two moving-average lines that overlie the price plot. This, and other stocks in the sporting-goods retailing business, are looking attractive. The pullback of the last week gives us an opportunity to buy it a little bit better price.

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Teva Pharmaceutical: Short

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Source: MetaStock

Teva Pharmaceutical (TEVA - commentary - Cramer's Take) was last mentioned in this column as a buy on Feb. 21 of last year; just about a year ago. It did, indeed, have an impressive rise, but that now appears to be over. It accelerated to a new high in January, but then it put in a square entry on the top and turned down with heavier volume and wider trading ranges. It has broken the ascending trend line and then rallied again on light trading. This looks like a good time to put on a short position.

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Humana: Short

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Source: MetaStock

Until just a month ago, every time the stock of Humana (HUM - commentary - Cramer's Take) moved higher, volume tended to get heavier, and the trading ranges tended to get larger. But now that appears to have changed.

Recently, the volume has been coming in on the declines, and the trading ranges have tended to become larger also. This change in character occurred as it gapped downward, forming what looked like a breakaway gap, and signaling a major change in the stock. It looks as though it is headed lower and could be shorted, especially on a lighter-volume rally.

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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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