The Arms Index moving averages have, on a short-term basis, swung quickly from one extreme to another. Ten sessions ago, as the top was being made, they were at terribly overbought levels, signaling an imminent drop. Now they have gone all the way to a terribly oversold level, signaling an imminent rally. The 10-day Arms Index, the second chart below, is the most oversold it has been since the February pullback low. Remember that I am talking about the short term. The damage done in the last two weeks, as we can see on the first chart, continues to say we may have seen an important longer-term sea change. Volume is coming in on the downside and the trading ranges are very wide, all bearish signs.
I believe short-term traders who acted on our short suggestion two weeks ago can now nail down some profits, and even look for trading longs. But long-term investors should consider selling into a rally.
(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.)
CubeSmart: BUY
I look for a wide base that can support a substantial advance when searching for potential buys. Then I want to see a breakout from that base with volume. MACD going positive is another encouragement and RSI coming up from an overbought position indicates strength. That makes CubeSmart (CUBE) look as though it is headed higher and has enough base to produce a profitable move. Traders could be buying around current levels, with a protective stop below last week's low.
Ventas: Buy
Ventas (VTR) is another stock that meets the parameters outlined above. It broke out on volume four days ago, then pulled back a little and is now strengthening again. MACD has turned up from a low and has had a crossover of the two lines to the positive side. It looks as though a buy around here could lead to a return to the highs of late August.
At the time of publication, Arms had no positions in the stocks mentioned.