Big Short Signal Looks Imminent

This article originally appeared on RealMoney.com on Sept. 3, 2014 at 7:00 a.m. To read more content like this AND see inside Jim Cramer's multi-million dollar portfolio for FREE... Click Here NOW.

I warned last week of the negative implication of the Candlevolume Cross we were seeing. It is an entry with low volume, a small trading range and nearly the same open and close levels. Such action is often seen on tops. (Bulls are buried under crosses.) So, the sideways area since then, and the drop yesterday, are not a surprise and it appears to have further to go. This is reinforced by the overbought levels of the shorter-term Arms Index moving averages

I said then that avoiding buying, taking profits on trading longs and watching for weakness as a reason for going short seemed the proper course. This weakness has not yet brought about a penetration of last week's low, which would be the signal to start aggressive shorting, but it looks imminent.

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Sprint: Buy

Early last week, Sprint (S)  moved higher with increasing volume, giving the appearance of the start of a turnaround. The RSI line at the top of the chart, which had been oversold, moved toward positive territory. MACD has now gone positive and the two moving average lines that overlie the price plot are just crossing to the plus side. The last few days look like a lighter volume pullback and an opportunity to buy the stock at a better level.


Tenet Healthcare: Short

Tenet Healthcare  (THC) appears to be turning down after a long advance. The checkerboard entries on the Arms Candlevolume chart indicate overhead resistance. The drop yesterday, while not large, was enough to break the prior support. The RSI is going down out of its overbought position and the MACD is negative. Traders shorting it here should have a protective stop buy order just above last Friday's high.

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

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