Stan Weinstein's Stage Analysis

[isatrader]

Attached is the updated major charts I follow. The S&P 500 held the trendline breakout from last week, however, the price action on the weekly bar shows indecision as to the next move. I've got the Stage as Stage 1B currently, so I think it could have another pullback to value before trying to reach Stage 2A like the Nasdaq 100 has already done. The 10 year Treasuries chart is interesting this week as it closed within a fraction of the previous high after a very strong week and looks poised to break out into a Stage 2 continuation this coming week. Which due to it's inverse relationship with equities, would quite likely cause equities to correct. So an interesting week ahead I think.

 

[isatrader]

US Industry Sectors

Below is the latest US Industry Sector charts. Percentage wise Basic Materials is leading the pack, but it's Mansfield RS is still below the zero line, but has been recovering nicely with the 30 week WMA rising again and the chart is now in Stage 1 and hitting the first major resistance level. Technology and Consumer Discretionary made an attempt at a Stage 2 breakout during the week, but both couldn't close above the breakout level, so I'm still classing them Stage 1B until they do.

 

[isatrader]

I'm fully invested in my portfolio for the investor method trades now. But I'm considering one or two changes to bring in some more risk assets to the mix, but after that my aim is to try and hold the trades until they are stopped out, hopefully after many months of a Stage 2 uptrend. But we'll see what time brings and I'll adjust my stops accordingly as per the method at each continuation pivotal point.

So I've been thinking a lot about where to go from here and have decided that in order to stop me tinkering with the investor positions and taking profits too soon, I need to keep myself actively involved in a different way. For which I've decided that it's a good time for me to start looking at the shorter term trader method from the book, as this will help me develop my knowledge of the stages further and it is also the right time to start preparing as the market is getting closer to a new Stage 2 phase, so I need to be ready to start buying stocks etc making new initial Stage 2 breakouts or Stage 2 continuation moves.

I'm going to spend some time refreshing my memory of the trader method from the book as I've mostly focused on the investor method for the last six months. So I need some time to change my mindset to a more active way of trading again and lay down a plan of action. I think I might start a separate journal for it as I don't want to clog up the discussion thread, as I want to keep this thread for looking at the broader picture and talking about the method.

 

[isatrader]

US Industry Sectors

With this weeks strong move in the S&P 500, two more sectors Technology (XLK) and Consumer Discretionary (XLY) managed to breakout out to new highs and reach Stage 2 again. This is a positive sign and the remaining sectors in Stage 1 are making good moves higher, but still have some resistance to work through before they can reach Stage 2 status themselves.

 

[incrediblefx]

hi isatrader,

seems technology is a strong sector.
have you found any companies in this sector to look at?

 

[isatrader]

hi isatrader,

seems technology is a strong sector.
have you found any companies in this sector to look at?

I took a hard look at the sector in January and thought that Apple was the best individual stock making a Stage 2 continuation move at the time. I noted the continuation move in AAPL on the 19th Jan (here's the link to the post: http://www.trade2win.com/boards/technical-analysis/134944-stan-weinsteins-stage-analysis-29.html#post1769334), but I choose to play the Nasdaq 100 index instead as I think the chart was showing that it has more upside potential than Apple in the medium term and it offered some diversification as is 100 stocks and not just one. Apples earnings then got it off to a flying start and my swing target of 499 that I mentioned looks possible, but the entry point has been missed if you didn't get in between then and the earnings. So leave that alone now as you always want to get as close to the ideal entry point as possible. The Nasdaq 100 however is not far above it's ideal entry point, so watch for a retest of the breakout level around 2440 as that would be a good lower risk entry point than currently imo, as the risk of a short term pullback is rising so we could see that very soon.

 

[incrediblefx]

Hi istrader,

thanks... I didnt know Nasdaq100 has broken to new high.
This is simply amazing.

I think financial sector is just breaking out from stage1. example Goldman sachs.

 

[isatrader]

I think financial sector is just breaking out from stage1. example Goldman sachs.

I've personally got financials rated as a Stage 1A at the moment, so it's still a bit too early for Weinstein's method trades as it needs to work through a bit a bit more resistance first. That doesn't mean it can't do very well from here and it is moving into a better posture at least, so you can start looking through the stocks so you are ready to act at the right time. You want to look for stocks in the sector close to Stage 2 breakouts, with only minor resistance above and good relative performance versus the S&P 500. Make a note of the Stage 2 breakout levels of the best ones and maybe set an alert in your software to email you when they are hit. I then usually personally to wait for at least a daily close above the breakout level, but prefer a weekly close above the breakout level for extra confirmation it's not a fake move.

 

[incrediblefx]

Livermore only described buying at the breaking from stage1 to stage 2.
Where can I find the entry for stocks that has been on stage 2? I'm still searching this part.

And then how would you know whether the stage 2 will be exceptional winner.
I guess we must incorporate other strategy?

 

[incrediblefx]

I found AIG has broken out from Phase 1.
I may consider this.

 

[isatrader]

Livermore only described buying at the breaking from stage1 to stage 2.
Where can I find the entry for stocks that has been on stage 2? I'm still searching this part.

And then how would you know whether the stage 2 will be exceptional winner.
I guess we must incorporate other strategy?

Study chapters 3 & 4 in the book (page 58 onwards) and do the exercises at the end of each chapter to make sure you've understood what you've read.

The breakout point where it moves from Stage 1 to Stage 2 is the ideal time to buy for both investor positions and trading positions. The only difference is the position size as an investor will only put half their intended position size on at the breakout point and then complete the position allocation when the stock makes the first major retest to the breakout level. Whereas a trader will put the full position size on straight away as they are playing a much shorter term move.

A trader will then do additional buying of a stock at Stage 2 continuation breakout points. This is when the stock is in Stage 2 on the weekly chart and the 30 week MA is still rising strongly, but the stock has consolidated for a while, but then breaks out again above the small range it's formed.

As for knowing whether it will be an exceptional winner. This is can't be known in advance, you just have to make the best picks from your research and then watch the volume in the weeks following the breakout. As the exceptional winners will see a large amount of volume come in - see Silver futures (SI) last year following the breakout above $20 in September. The volume really picked up and stayed higher which drove the price up.

There's a lot to consider, but the key is to put in the work and research as much as you can so that you understand the method.

 

[isatrader]

Attached is this weeks major charts for analysis. The S&P 500 survived it's minor pullback to the trendline breakout at 1300 and is now in Stage 2A by my reckoning and closed the week strongly near the high of the week.

Below are the charts

 

[isatrader]

Secondary Indicators

The secondary momentum indicators are still tracking the move higher with a slight positive divergence in the NYSE advance decline moving average on the weekly chart which has broken out to a new high, whereas price itself has yet to reach that level.

Price's distance above the 30 week weighted moving average is now 7.8%, previous times when it's been below -10% and then recovered above 5% for the first time in 2003 and 2009 saw it rise to 9.9% and 10.8% respectively. So that suggests it is near its normal upper channel limit, but it could have a few more percent in it yet before it needs a breather. But watch the price action always first as indicators are only secondary tools.

On another note if you are interested in other secondary indicators such as market breadth charts, I've been keeping a journal on BMT on which I update these regularly. Here's the link to the latest one: Trading breakouts with stage analysis - Trading Journals - Page 8

 

[incrediblefx]

Hi istrader,

thanks for your explanation. I will re-read again.

 

[isatrader]

US Industry Sectors

Attached is the latest Weinstein style US Industry Sector charts. Technology is in a clear Stage 2 continuation by continuing it's run to new highs. Consumer Discretionary is the next strongest and managed to hold above the Stage 2 breakout level again this week although this weeks price action was similar to the broad market so I think it's still a Stage 2A. Consumer Staples also continues to hold onto to it's Stage 2A breakout level and has traded sideways for the last month, but as it's a more defensive sector a pullback in the broad index could spur it higher again.

Below is the charts for your own analysis

 

[isatrader]

Attached are this weeks major charts for analysis. The Dollar Index and The Treasuries charts are pivoting around their 30 week WMAs. Whereas Copper had a reversal at it's first major resistance of $4 which it's been trading into for the last 3 weeks and is trading in Stage 1A. If it pulls back here further then the $4 level could become the Stage 2 breakout point to watch for. Gold continues to forge it's very large Stage 3 range and the 30 week WMA has turned slightly positive again for 3 weeks now. The Nasdaq 100 continues to be the leader and is strongly in Stage 2 now, whereas the S&P 500 is still in early Stage 2A and hitting the upper resistance levels.

 

[dinapoli]

As we seem to be disagreeing on the current Stage of the S&P 500 I've laid out the sub-stage definitions from the Global Trend Alert Newsletter below and will explain why I personally think it's now Stage 1A.

Stage 1A - Start of a base. Needs much more time.
Stage 1 - Basing Phase. May begin accumulation.
Stage 1B - Late in base-building phase.Watch for breakout.

Stage 2A - Early in uptrend stage. Ideal time to buy aggressively.
Stage 2 - Advancing Stage
Stage 2B - Getting late in uptrend. Watch carefully. But still a hold.

Stage 3A - Looks as if a top is starting to form. Be sure to protect holdings with a close stop.
Stage 3 - The Top Area. Start to reduce positions.
Stage 3B - Has become increasingly toppy. Use rallies for at least partial selling.

Stage 4A - Stock has entered Downtrend Stage. Close out remaining positions.
Stage 4 - The Declining Stage. Avoid on the long side.
Stage 4B - Late in downtrend. Much too soon to consider buying.

Additional ratings
(A) Early in that Stage.
(B) Late in that Stage.
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Below is the most recent interview with Stan Weinstein from 12th November 2011. The interview starts around 30 minutes into the recording.

Technician Stan Weinstein: Markets Still in Neutral Territory, Still Opportunities to Make Money Jim

During the interview on 12th November Weinstein says the S&P 500 is in Stage 4B- (Which from the definitions above is - Late in downtrend. Much too soon to consider buying. So it is eight weeks later now and the S&P 500 has since made two higher lows. The 30 week weighted* moving average is flat as has been moving between up an down randomly for the last 8 weeks, with a total of 4 down weeks and 4 up weeks. Currently it has turned up for the last two weeks (see my chart attached). Price has broken out of and held above a 10 month down channel for the first time, although this was during the light volume year end week. Price has also managed to close above the flat 30 WMA for 5 weeks in a row now, so by my interpretation of the method and extrapolating from Stan Weinstein's own rating in early November I think we have now moved into Stage 1A, although it could deserve a minus rating as it is an unexciting pattern in that Stage. So I agree that this isn't a time to be buying or selling until the market moves into either a Stage 4 continuation move (below 1158 for me) or stabilises further into a proper Stage 1 - where he says you may begin accumulation.

*The 30 week weighted moving average - from my study of the book I came to realise that even though he talks about the 30 week moving average. He was actually using the 30 week weighted moving average, as that is what the Mansfield charts he uses for all of his actual examples uses. So this is one of those grey areas from the book that is open to interpretation. Currently if you use the 30 week simple moving average it is still in a downtrend although momentum has slowed. However if you use the weighted 30 week MA - as the Mansfield charts did - the MA has been flattening for the last 10 weeks and has turned slightly up for the last 2 weeks. So to be clear, I'm going to stick to using the weighted moving average as I think this the most faithful to real examples from the book.

As always this is just my opinion from my interpretation of it.

Hello I`m Spanish follower of Weinstein Method, and i decide to follow this thread because they are not many tread following Weinstein Method.

On that interview Weinstein talked about some stock, but i just couldnt understand it. Some of them were ANR, BZO, MHO but the other of the steel sector no idea.

Thanks Isatrader for posting the GTA of 2005 so we can follow the differents between each Stage. And after 10 years in the market i have never seen charts as easy to read, beautiful to watch than yours with the ProTa. Sorry there is not such program for Windows users.

Thanks a lot, and a new follower of Weinstein for the thread ;-) Sorry i don´t have Force Index or Performance Indicator.

 

[biggnick]

hi guys, thought I would post my first message to say hello. i have read back through all of the posts before posting. i am a relative novice when it comes to investing, but of the books that i have read so far, the weinstein method is for sure the way that i plan to go. i was hoping someone could help me though. I am happy to invest in both uk and us stocks, however at this stage, i am really struggling to find the best website to use to analyse them. so far, i have used mainly google finance, stockcharts.com and also bigcharts.com. these all seem to work ok for us stocks, but i am really stuck on where to get good charts for uk stocks. and then on the best way to assess sectors. any help would be appreciated

 

[isatrader]

hi guys, thought I would post my first message to say hello. i have read back through all of the posts before posting. i am a relative novice when it comes to investing, but of the books that i have read so far, the weinstein method is for sure the way that i plan to go. i was hoping someone could help me though. I am happy to invest in both uk and us stocks, however at this stage, i am really struggling to find the best website to use to analyse them. so far, i have used mainly google finance, stockcharts.com and also bigcharts.com. these all seem to work ok for us stocks, but i am really stuck on where to get good charts for uk stocks. and then on the best way to assess sectors. any help would be appreciated

Hi biggnick, for UK stocks there are a number of options for charts. I use ADVFN for mine, and I know another member on this thread uses Sharescope for his UK charts, both of which are more than adequate for what you need and have all the UK sectors available. Unfortunately with UK stocks there's not many good free options which is why I pay a monthly subscription for the UK stocks as some of the free sites have some bad data I've noticed. But you could try ProRealTime charts which are free and web based. They do have subscription options as well, but I think their UK charts are accurate.

For UK sectors I've posted the list of them a few times in the thread so have a look through and then you can put the ticker symbols into whatever software you choose and save as portfolio.

 

[isatrader]

Thanks Isatrader for posting the GTA of 2005 so we can follow the differents between each Stage. And after 10 years in the market i have never seen charts as easy to read, beautiful to watch than yours with the ProTa. Sorry there is not such program for Windows users.

Thanks a lot, and a new follower of Weinstein for the thread ;-) Sorry i don´t have Force Index or Performance Indicator.

Thanks for posting dinapoli. I'm glad you like the thread. It takes a lot of effort, but I think it's really helped me to focus and develop my understanding of the method further and I hope it's helping other people as well. Feel free to contribute anytime or ask questions as talking about it really helps us all I think.