Stan Weinstein's Stage Analysis

[sarker]

Hi Istrader,

Im also a fan of Stans book. Did some trade in forex, got some good return. As I see, you are using this method from october 2011, Can pls tell me whats the success ration of your trade with this method and return percentage( if you want to disclose).what are the other confluences , you use to make it for sharp and more accurate( Saw you use, trendline,osilator etc).

Thanks in advance.

 

[isatrader]

Hi Istrader,

Im also a fan of Stans book. Did some trade in forex, got some good return. As I see, you are using this method from october 2011, Can pls tell me whats the success ration of your trade with this method and return percentage( if you want to disclose).what are the other confluences , you use to make it for sharp and more accurate( Saw you use, trendline, osilator etc).

Thanks in advance.

Hi sarker, my forward test period was between late October and early March and I slightly outperformed the S&P 500 over the period, although I made a number of mistakes as I was still at the early stages of learning the method and so the results were subjective as another person would have made different picks and would have been more or less impulsive with exits etc. A fair few of trades shouldn't have been exited at all and would still be open today if I'd have followed the method completely faithfully.

The method isn't a rigid set of rules and so everyone will have different results as they will pick different stocks, but I found that it got me into stocks at a good time and that of the 23 trades I had 17 wins and 6 loses, and the biggest winners were 3 times bigger than my biggest losses. So it was a reasonable start, but as it's a long term method I can't tell you much else yet, as it will take years to build up a big enough sample of trades to be relevant to anyone else. All I can say is that I'm encouraged by it and that I'd find it hard to invest in any other way now, as whenever I look at a chart, I determine it's stage and make a decision to whether it's worth further analysis.

 

[sarker]

Thanks Istrader for the reply.

Feeling good after hearing from you. In the trading , entry isnt problem but good entry is a problem. If I compare, good entry and good exit, then good exit is the most tough one.

As it is along term trading, so it will be better to trail the profit and adding position in the pullback.When I enter on trade with this method,then I added position when it creates a new high or cross the recent Higher High and Close some some added position when it breaks a lower High. It means , I make more trade on a long trade, As I'm a full time trader.

 

[isatrader]

Futures Relative Performance

Here's the updated Futures RS table and the attached are the thumbnail charts in order of relative performance. Soybean Meal is still the top performer and Orange Juice is the worst.

 

[lplate]

Re: Gartner IT

Were I to ignore this CFO and EVP of Gartner Inc. Christopher Lafond sold 52,282 shares - NASDAQ.com ,
then I would think this to be a lovely chart IT - weekly 30sma - StockCharts.com
That is what very much annoys me with American companies, and it makes you wonder what corporate spirit is like within such a company.

 

[isatrader]

US Industry Sectors

Some changes on the US sectors with Technology (XLK) taking back it's lead that it had for much the early part of the year and the defensive sectors dropping down the list a bit. If you look at the daily charts you'll notice that all 9 sectors are above their 50 day (blue line) and 200 day moving averages (red line) which is a positive sign and energy has made a big recovery as has been a laggard for a long time.

 

[lplate]

Re: US Industry Sectors

. . . If you look at the daily charts ... energy has made a big recovery as has been a laggard for a long time. . . .

Thanks ISA. Although the natural gas stocks are, at best, bottoming, two oil integrated majors have got new highs and weekly chart breakouts Exxon XOM - weekly - StockCharts.com and Chevron CVX - weekly - StockCharts.com Vol is not great, but that is the peril of August.

 

[isatrader]

Thanks ISA. Although the natural gas stocks are, at best, bottoming, two oil integrated majors have got new highs and weekly chart breakouts Exxon XOM - weekly - StockCharts.com and Chevron CVX - weekly - StockCharts.com Vol is not great, but that is the peril of August.

I'd agree with that. If you look at the physical commodity futures charts of Crude Oil (CL) and Natural Gas (NG), I'd say that Crude Oil has had a good recovery bounce from the retest of the lows and is now a Stage 4B- and Natural Gas has moved into Stage 1 and is starting to build a base with a break above $3.2770 as the Stage 2A breakout level.

This has filtered through into the stocks in the XLE, but although the Mansfield Relative Strength reading has recovered strongly, it's still below the zero line. Which shows that it's not quite there yet, but there will be some good trading picks like you've found in those two Stage 2 continuation moves for XOM and CVX.

Some others with excellent relative strength to consider are TSO, COG and VLO. TSO has made a very strong continuation move over the last few weeks, but you'd need to wait for a pullback now towards the breakout 30 level imo as the Stage 2 continuation entry point has been missed, so you'd need to wait for the secondary lower risk entry point.

 

[isatrader]

Updated major charts for analysis. The Dax is showing the best Mansfield relative strength reading still, followed by the Nasdaq 100 and then the S&P 100 Mega Caps. The Dollar Index and the FTSE 100 are also slightly outperforming currently.

The S&P 100 is the closest to breaking out to new highs and a Stage 2 continuation move, and could be classed as already there if you look at closing data only. But I personally like to get confirmation with a close above the previous high, which it closed just below last week.

 

[lplate]

Re: US Industry Sectors

Some changes on the US sectors with Technology (XLK) taking back it's lead that it had for much the early part of the year and the defensive sectors dropping down the list a bit. . . .

An addition today to the Current Watch List from stocktiger.net offers a tech stock which fits a Weinstein breakout buy, I think, though am not sure how it looks on your charts.
Any thoughts?
DigitalGlobe Inc., DGI -weekly - BigCharts.com
(He charts on a daily basis so says wait for a break of $20.25 )
DGI had good results at the end of July.

 

[isatrader]

Re: US Industry Sectors

An addition today to the Current Watch List from stocktiger.net offers a tech stock which fits a Weinstein breakout buy, I think, though am not sure how it looks on your charts.
Any thoughts?
DigitalGlobe Inc., DGI -weekly - BigCharts.com
(He charts on a daily basis so says wait for a break of $20.25 )
DGI had good results at the end of July.

Hi lplate, that looks to be a solid Weinstein pick from my charts which I've attached. It made a strong Stage 2A breakout three weeks ago on almost 5 times the weekly average volume. The Mansfield RS also went positive at the same time and the cumulative volume has been growing since late April and has also gone positive. Another thing you may notice on my weekly chart is that DGI has made a large inverse head and shoulders pattern since November 2011 and completed that with the Stage 2A breakout in late July.

I've included the P&F chart as I find it especially useful for estimating longer targets and gauging the amount of resistance the stock has to work through. You'll see there was strong resistance around 17.5 to 18, which is now support, and that it's approaching another strong resistance at 21. If it breaks above 21/22 zone, then it looks to have a reasonably clear run towards the P&F target of 32.5, although there's a lot of volume resistance at 30. So you need to decide how you are going to play it, as it's already 15% above it's Stage 2 breakout point and is in a resistance zone. So if you're following Weinstein's method, then as you've missed the Stage 2 breakout point, the lower risk option would be to wait for the secondary entry point, which is a pullback towards the breakout level. However, it might not give you that chance if it's a really strong breakout, as it's already had a very small pullback to 18, so the option then would be to play a continuation move above 21.

Another method for targets which I like and use a lot from Weinstein's book is the swing target method, where you measure the range of the base pattern (which is roughly $6 for DGI) and add that to the breakout level. This then gives you the swing target of $23.5 by my estimate, which is also coincidentally another resistance level from summer 2011.

It's a good pick imo, and I'll be interested to see how you play it.

 

[lplate]

Re: US Industry Sectors

. . . You'll see there was strong resistance around 17.5 to 18, which is now support, and that it's approaching another strong resistance at 21. If it breaks above 21/22 zone, then it looks to have a reasonably clear run towards the P&F target of 32.5, although there's a lot of volume resistance at 30. So you need to decide how you are going to play it, as it's already 15% above it's Stage 2 breakout point and is in a resistance zone. So if you're following Weinstein's method, then as you've missed the Stage 2 breakout point, the lower risk option would be to wait for the secondary entry point, which is a pullback towards the breakout level. However, it might not give you that chance if it's a really strong breakout, as it's already had a very small pullback to 18, so the option then would be to play a continuation move above 21. . . . .

Thanks isa for that thoughtful analysis. You are right that the ideal would be a pullback of a couple of $ to around $17.5/18, especially if it is on low volume, repeating the pattern of May to mid July.
You are right also that I have missed one pullback already, so I have the old dilemma of where to place a stop and whether to chase a runner. I think I'll have to mix it a bit:
1. buy if the share price rises a little way into an apparently also rising market day (which today wasn't)
2. look out for another pullback to buy at, ideally near breakout, but, if I am not that lucky, then even if the price is higher than now
3. be encouraged by the regular price pattern of this share, so a (mental) stop needs to be no more than a little way below breakout level and can trail at approx $3

 

[isatrader]

Re: US Industry Sectors

Thanks isa for that thoughtful analysis. You are right that the ideal would be a pullback of a couple of $ to around $17.5/18, especially if it is on low volume, repeating the pattern of May to mid July.
You are right also that I have missed one pullback already, so I have the old dilemma of where to place a stop and whether to chase a runner. I think I'll have to mix it a bit:
1. buy if the share price rises a little way into an apparently also rising market day (which today wasn't)
2. look out for another pullback to buy at, ideally near breakout, but, if I am not that lucky, then even if the price is higher than now
3. be encouraged by the regular price pattern of this share, so a (mental) stop needs to be no more than a little way below breakout level and can trail at approx $3

I think the broad market is a key factor to consider as well. I'm really encouraged by all the positive market breadth signals which I post in the other thread every week:

http://www.trade2win.com/boards/technical-analysis/147476-market-breadth-7.html#post1938512

However, until we get a weekly close above 1422.38 on the S&P 500, we are still in Stage 3, and so it's a dangerous time as the market participants are battling at the top of the range to either break out into a Stage 2 continuation move or fall further into Stage 3 and possibly rollover. So that's another factor to consider with your pick as it has 59% correlation with the S&P 500 on a 20 day average at the moment, and so will be influenced by what the broader market does.

 

[lplate]

FLT - breakout on results today

FlightCor Tech is a bit of a puzzle to me:
1. It is only 18months listed
2. It is a b/o on results today, and must admit I don't know what to do when that happens.
FLT weekly Stockcharts
FleetCor Technologies Beats on Both Top and Bottom Lines (FLT)

 

[isatrader]

Re: FLT - breakout on results today

FlightCor Tech is a bit of a puzzle to me:
1. It is only 18months listed
2. It is a b/o on results today, and must admit I don't know what to do when that happens.
FLT weekly Stockcharts
FleetCor Technologies Beats on Both Top and Bottom Lines (FLT)

I've attached a few charts for a better look at it. It's a Stage 2 continuation move so you'd likely play it using the trader method. The gap up 5 days ago gives you a clear low to place you stop below, as a move below that wouldn't be good, although there is clear volume support on the P&F chart at the 36.4 level, so it might not be a disaster for the stock, but you'd want to be out of it.

The swing target is measured from the May high to the June low which is 41.3 - 33.73 = 7.57. Add that to the May high and you get a swing target of 48.87 which is 16.4% above todays close still.

Quite a few of the examples in the book were relatively new stock listings at the time, so I don't think that should put you off. Just play it like any other Stage 2 continuation move. Personally I'd look for a pullback to 41 to get in with a stop below 38.5

The ATR(200) is 0.908, so the stop would be just over 2.75 days average range, which is a reasonable distance imo as I've found they tend to be in the 2 to 3 days range.

 

[lplate]

Re: FLT - breakout on results today

Thanks for all your analysis, isa. It is very useful.
Here are some more Weinstein situations inspired by the stocktiger watchlist. I am not expecting such full analysis on these, but thought you and others might find them food for thought over the weekend.

I’ve put these in what I think is order of attaction

Ex-bankrupt, unloved on fundamentals and listed only two years, gasoline storage company SEM Group has nevertheless broken $35 on volume and is attractive technically because it has no overhead resistance. Is there value to unlock?
SEMG -weekly- StockCharts.com

Medical business support company, Medical Assets, on contract news, has gapped up through the $14
MDAS - weekly- StockCharts.com

Already run 20% ($3) so pullback needed, in this energy services company
Exterran Holdings EXH - weekly- StockCharts.com

Old tech punter favourite Sirius XM regains love on good newsflow and so offers TA a break over $2.50 in a continuation set up, I think SIRI 5yr weekly - BigCharts.com

 

[isatrader]

Re: breakout on results today

Thanks for all your analysis, isa. It is very useful.
Here are some more Weinstein situations inspired by the stocktiger watchlist. I am not expecting such full analysis on these, but thought you and others might find them food for thought over the weekend.

I’ve put these in what I think is order of attaction

Ex-bankrupt, unloved on fundamentals and listed only two years, gasoline storage company SEM Group has nevertheless broken $35 on volume and is attractive technically because it has no overhead resistance. Is there value to unlock?
SEMG -weekly- StockCharts.com

Medical business support company, Medical Assets, on contract news, has gapped up through the $14
MDAS - weekly- StockCharts.com

Already run 20% ($3) so pullback needed, in this energy services company
Exterran Holdings EXH - weekly- StockCharts.com

Old tech punter favourite Sirius XM regains love on good newsflow and so offers TA a break over $2.50 in a continuation set up, I think SIRI 5yr weekly - BigCharts.com

Hi lplate, they look to be some good picks. If you refer back to the book, the quiz from page 157 to 163 would be quite useful to help you refine your picks on this one.

I've attached a relative comparison chart below so you can see how each has performed against each other.

Of the picks I actually like SEMG and SIRI personally, as I like go for the ones with the least overhead resistance. But the comparison chart shows that EXH is the strongest currently on a peer to peer basis, as it's outperforming the other three. Second is MDAS which is outperforming two, and then SEMG, which is outperforming SIRI. So I think it depends greatly as it will be different if it's for a trader position or an investor position imo. The trader pick would probably be the short term strongest which is EXH, but I'd say the investor pick would be SIRI imo, as it's greatly outperformed the other three over the longer term and has no overhead resistance to deal with.

 

[lplate]

Re: Best breakout candidates

Isa, thanks for that interesting way of comparing stocks, and I can see how you found your conclusion of liking SIRI and SEMG.
Thanks for highlighting chapter 5 on Uncovering Exceptional Winners, and that certainly does help to confirm or filter candidates.
As far as I am concerned, one fault I find in the book is that, as with all ratio comparisons, the position of the zero line depends on where you start the comparison, so it does not help to have a criterion of crossing over the zero line. If the ratio is rising, then it means the stock is outperforming, and that is all that matters.

 

[isatrader]

Re: Best breakout candidates

Isa, thanks for that interesting way of comparing stocks, and I can see how you found your conclusion of liking SIRI and SEMG.
Thanks for highlighting chapter 5 on Uncovering Exceptional Winners, and that certainly does help to confirm or filter candidates.
As far as I am concerned, one fault I find in the book is that, as with all ratio comparisons, the position of the zero line depends on where you start the comparison, so it does not help to have a criterion of crossing over the zero line. If the ratio is rising, then it means the stock is outperforming, and that is all that matters.

That's why I like to use the 30 week MA on the ratio charts as it's a relative measure. So I use the direction of 30 week MA to determine the trend between the peer stocks, as it removes the volatility. But trend lines are also useful.

 

[isatrader]

Re: EURGBP Stage Analysis

[From Nov 26th 2011] I stumbled upon an interesting chart today, and thought I'd mark it up as I think it shows a lot of promise for a long term sell. The EURGBP chart has formed a large stage 3 top over the last 3 years or so after a huge Stage 2 run up of around 3000 points in 2007 and 2008.

The price broke down last year to give a Stage 3 low point below the 30 month moving average. This gave a pivot point for a 5 year trendline, which held over the last year until it was breached in September. Price has bounced around that trendline for the last 3 months, but it looks like the sell side is winning as it's not been able to get back above the trendline this November and was sharply rejected when it tested it again this week.

Volume on forex isn't the same as stocks, so I can't use the crucial volume part of the method faithfully on this chart. So I use my backup of cumulative volume at the bottom with a moving average to determine the conviction of the move. Which seems strongly negative as cumulative volume is near the low, but price hasn't fully broken yet - so there is a negative divergence.

The 30 month moving average has turned down for the last 3 months and the weekly chart has moved in early Stage 4A. So I'm looking to sell this with an initial swing target at 81, but hopefully it will eventually take that out as well and continue lower. But as I'm using a monthly chart for this, it could take a very long time to play out.

I've been looking back through some of my old analysis and stumbled on this EURGBP one from last November 2011, which is still playing out as I'd hoped it would. I've got in and out of it a few times, but I got back in it again a few weeks ago on the small pullback to resistance as I still think this one has a long way to go, but as I said last year it's a very long term trade for me.