Panic Low May Be In Place

On the first chart below, I have placed an ellipse over the last few entries of the moving average convergence/divergence (MACD), across the top, and labeled it a crossover. That is an important development. This indicator has been in a bearish mode since early September, but has now gone bullish. It reinforces my belief that we saw an extremely important low on Oct. 10.

Since then, we have tested the level and built a substantial base. We still have a very nervous and ambivalent market, as can be seen in the numerous wide and seemingly irrational swings. But there now appears to be a tendency to move prices higher.

What we appear to have gone through is a traditional panic low. In the past, such moves have led to very profitable advances.

The Arms Index moving averages have moved away from their extreme readings, as immense numbers are replaced with more rational ones. But we are still well into oversold territory, suggesting there is a rally ahead. On the low, I was saying to go in the direction of the panicking public. I still think it is a time to be buying.

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To view a larger version of these charts (in some browsers), after clicking on the "larger image" link below the chart, mouse over the lower-right area of the chart until the icon with four arrows appears. Then click on that icon.

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Dow Jones Industrial Average

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Source: MetaStock

Arms Indices

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Source: MetaStock

Apple: Buy

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Source: MetaStock

It looks like time to swing back to the buy side of Apple (AAPL - commentary - Cramer's Take). It has given us two prior good trades this year. It was suggested as a buy last March, then as a sell and short in June.

Now it has again found a support level, built a base and shown strength. Volume has come in on the up days recently. All the indicators are in gear, suggesting the stock is going to again move higher. It looks as though it could be bought around its current price.

(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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Northeast Utilities: Buy

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Source: MetaStock

Earlier this week, I was suggesting buying some of the Utility stocks. Northeast Utilities (NU - commentary - Cramer's Take) is another that looks headed higher. The MACD and the volume-adjusted moving averages have both crossed to the positive side. The move off the big reversal low was turned back, and then tested. That was followed by a typical pullback flag, indicated with the pair of blue trend lines. Now it has gone above the top of that flag, suggesting the advance is resuming. It looks like time to buy this one.

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Nucor: Buy

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Source: MetaStock

Nucor (NUE - commentary - Cramer's Take) has moved out of the downtrend going back to June. It also went through the prior high, and it did so with a bit better volume. This stock lost more than half its value in just four months, but now appears to have found support, and could move quickly higher.

MACD, across the top of the chart, has crossed to the positive side, and so have the two moving-average lines that overlie the price plot. In this market, waiting for a pullback could mean missing a move, so I am inclined to just go ahead and buy around current levels.

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Boeing: Buy

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Source: MetaStock

My last comment on Boeing (BA - commentary - Cramer's Take) was back at the end of February, when I also suggested a buy. That was a far from great recommendation, leading to just a small profit before the big slide we see on the above chart.

But now it again looks as though it is headed higher, and could be bought. I like the big volume, the washout low and subsequent lighter-volume test. Two days ago, it broke out of the base it had formed, and it did so with heavier volume, and it left a gap behind. It looks like a buy right around here.

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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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