Stan Weinstein's Stage Analysis

[lplate]

Re: PSTI and STEM - small biotechs

It's a very dangerous game playing the small penny pharma stocks imo . . ..

In the book I couldn't find any reference to market cap and sectors-to-avoid. Are there any?
They are definitely dangerous, not only because a failed trial or running out of cash can devastate a small biotech,
but because 1. they are spikey both ways, so it can be hard to place an automatic stop
and 2 they don't act "technically", but shift around only when there is a news item.
Thus they feel to me like "trader" stocks to be used with daily charts, or, even more likely, to be fondly viewed by the day trader who looks for pre and post market action etc.
Nevertheless, if you can work with a mental stop (or guaranteed stop if you must), and bet a very small amount, I can't see why they can't be a bit of spice.
I can see the news case for both these stocks,
but in both these cases from an investor perspective, I think the main breakout from stage 1 is lower down,
at about $3 on PSTI - 18 month weekly - StockCharts.com
and about $1.15 on STEM - 18 month weekly - StockCharts.com
(and are now starting to hesitate into potential stage 3s).
From these breakouts they have actually continued up significantly, so that is why I think in principle these small-priced biotechs need not be ignored.
(Myself I don't bet on them, as I am cautious, but I look at them as they often show extreme chart patterns.)

 

[isatrader]

Re: PSTI and STEM - small biotechs

In the book I couldn't find any reference to market cap and sectors-to-avoid. Are there any?
They are definitely dangerous, not only because a failed trial or running out of cash can devastate a small biotech,
but because 1. they are spikey both ways, so it can be hard to place an automatic stop
and 2 they don't act "technically", but shift around only when there is a news item.
Thus they feel to me like "trader" stocks to be used with daily charts, or, even more likely, to be fondly viewed by the day trader who looks for pre and post market action etc.
Nevertheless, if you can work with a mental stop (or guaranteed stop if you must), and bet a very small amount, I can't see why they can't be a bit of spice.
I can see the news case for both these stocks,
but in both these cases from an investor perspective, I think the main breakout from stage 1 is lower down,
at about $3 on PSTI - 18 month weekly - StockCharts.com
and about $1.15 on STEM - 18 month weekly - StockCharts.com
(and are now starting to hesitate into potential stage 3s).
From these breakouts they have actually continued up significantly, so that is why I think in principle these small-priced biotechs need not be ignored.
(Myself I don't bet on them, as I am cautious, but I look at them as they often show extreme chart patterns.)

The book doesn't mention market cap or sectors to avoid as Weinstein's method can be used with most charts I've come across so far during my research. My advice on this was more from personal experience of when I began and had the same urges to play small volatile stocks, as I was enticed by the big gains possible and even got a few occasionally. But, there was also big losses too that damaged my account and took a long time to recover from. So I think for someone like Locked In that's only going to be able to trade a few stocks or more at a time, that risk management is absolutely essential and volatile penny stocks like he picked could do serious damage to his account if they go wrong.

However, I don't disagree with you that they need not be ignored, and for people that have the appropriate account size to make the positions small enough proportionally not to damage their accounts should they go wrong, can by all means play them if they choose. But I harp back to what I said before that risk management is essential and that you need to understand what you are trading, so be careful if you do and read my signature below from the late, great Jesse Livermore.

 

[Locked in]

Well put by both of you. I agree that I will not have enough capital to speculate on these stocks. Dangerous because I have had a lot of wins in the fantasy portfolio but I see your point that it could turn fast and cripple a real account. Thanks for the input on risk management- that is something I really need to pay attention to.

 

[vali83]

Isa,
thanks for your remarks. I managed to set up my freestockcharts account as you suggested. I would prefer stockcharts, but since i don't have enough capital to afford an account with them i'll stick to freestockcharts for a while.

I saw you posted the list of DJ tickers by industry groups.
I also have been able to find that my self and lately i was busy in searching for free information about who the constituents of each group are. Freestockcharts offer you a way to list the companies by sector, but i think they are showing the Morningstar Industry Groups, which is referring to SPDR and therefore i can't see the entire list for each group. I found this link: Industry Research - Market Research by Industry - All Industries - BigCharts.com
I think that this is the correct list of stocks that are the constituents of each group.
Do you guys think i got it right?

 

[isatrader]

Isa,
thanks for your remarks. I managed to set up my freestockcharts account as you suggested. I would prefer stockcharts, but since i don't have enough capital to afford an account with them i'll stick to freestockcharts for a while.

I saw you posted the list of DJ tickers by industry groups.
I also have been able to find that my self and lately i was busy in searching for free information about who the constituents of each group are. Freestockcharts offer you a way to list the companies by sector, but i think they are showing the Morningstar Industry Groups, which is referring to SPDR and therefore i can't see the entire list for each group. I found this link: Industry Research - Market Research by Industry - All Industries - BigCharts.com
I think that this is the correct list of stocks that are the constituents of each group.
Do you guys think i got it right?

Yep that looks fine to me. Or you can go to where I got the list in stockcharts as you can click on each sub-sector and get the complete list of stocks for each. Here's the link: Complete Industry Listing for S&P Sectors - StockCharts.com

 

[vali83]

Yep that looks fine to me. Or you can go to where I got the list in stockcharts as you can click on each sub-sector and get the complete list of stocks for each. Here's the link: Complete Industry Listing for S&P Sectors - StockCharts.com

Yes, your link is even better than what i found. It's much easier to scan the groups from stockcharts. Thanks again for a this great info
I hope now it'll be easier for my to identify the best stock to put in my first order :cheesy:

 

[isatrader]

Stage 2 Continuation

There was multiple individual Stage 2 breakouts and continuation moves yesterday with daily closes at new highs in the indexes, which can also be seen in the breadth chart of the NYSE percentage of stocks above their 150 day (30 week) moving averages. However, it's important to get a weekly confirmation with a weekly close in the S&P 500 above 1422.38 especially with more market moving data in the Nonfarm payrolls coming out today at 8.30 am US Eastern time.

 

[lplate]

Sfl

The one that caught my eye most: small cap ($1+ bn) ship operator Weinstein b/o this week at $16.60 (then ran over $17) on no news. It has 9+% divi, so it is poss accum ahead of ex-divi next week.
SFL - Ship Finance International - 3yr wkly - StockCharts.com

 

[isatrader]

Re: Sfl

The one that caught my eye most: small cap ($1+ bn) ship operator Weinstein b/o this week at $16.60 (then ran over $17) on no news. It has 9+% divi, so it is poss accum ahead of ex-divi next week.
SFL - Ship Finance International - 3yr wkly - StockCharts.com

It could be a case of "a rising tide lifts all boats" this week as a large amount of stocks were lifted by the various macro news. SFL looks good though, but it wasn't the only riser in it's sector - Marine Transportation. Another one to consider is CMRE - Costamare Inc which looks good too and had the strongest move of the sector this week up 15.79% and broke through the major volume resistance in the 14-14.5 range (see P&F chart), which now becomes support. Here's the sector link: StockCharts Sector Summary - Free Charts - StockCharts.com

 

[lplate]

Re: CMRE

It could be a case of "a rising tide lifts all boats" . . . CMRE - Costamare Inc which looks good too and had the strongest move of the sector this week . . .

Thanks for pointing this out isatrader - and that's a very good line !!

 

[isatrader]

Re: CMRE

Thanks for pointing this out isatrader - and that's a very good line !!

Cheers, I thought it was quite apt for what we've seen this week. But correlation with the indexes is something to be mindful of with stocks, as roughly 70-80% of stocks intra-day moves are caused by the indexes I believe I've read in the past. Your pick SFL for example has a 200 week correlation with the S&P 500 of +65% and a 40 week (200 day) correlation of +74%. So between two thirds to three quarters of it's moves are in line with the S&Ps moves. So although individual stocks technicals and fundamentals are important, they generally only make up a third a less of the reasons of why it's moving in a lot of cases. Which is why I think the top down approach of Weinstein's method helps, as it focuses on the dominant force of the broad market first.

I've attached the chart below:

 

[isatrader]

Stage 2 Continuation

I thought I'd post the updated S&P 500 chart and the breadth chart, that I said needed to confirm yesterdays Stage 2 continuation move with a new weekly closing high. The market held up Friday and closed the week strongly, so we are now back in Stage 2 again. This was also given further weight by the fact that another 10% of stocks in the entire New York Stock Exchange moved above their 30 week (150 day) Moving Averages, and now 70.8% of stocks are trading above their 30 week (150 day) Moving Averages.

I'll post up the major charts and the industry sectors at the weekend so we can analyse the market moves further. Have a good weekend.

 

[isatrader]

US Industry Sectors

It's been a few weeks since I last did the US Industry sectors and Technology (XLK) has held onto the top spot during that time. The big movers have been Consumer Discretionary (XLY) and Financials (XLF), which now occupy the second a third spots with positive Mansfield RS. Utilities (XLU) is the biggest faller though and is now at the bottom again. Attached are the weekly and daily thumbnail charts.

If you want to drill down into the sub-sectors from this to look for individual stock picks, then here's the link again: Complete Industry Listing for S&P Sectors - StockCharts.com

 

[theblackmamba]

heres one i like, but maybe not strictly weinstein, but my interrpretation..

 

[isatrader]

Here's one i like, but maybe not strictly Weinstein, but my interpretation..

TUMI looks like it's got potential, but it's already had a 60+% move in two months and has strong volume resistance in the 26-26.99 range on the P&F chart from it's initial listing high range. So that's the area to watch imo, especially as this weeks move wasn't backed by any volume. As it needs to clear that first.

 

[isatrader]

There was a number of breakouts on the stock index charts this week driven by the various macro headlines that we got out of the European Central Bank, and the US and Chinese data. And so, as the broad market has now moved into a Stage 2 continuation phase, it's important to be focusing on the long side and looking to play the areas showing the most relative strength vs the broad market. I posted the US Industry sector RS list earlier, but below is the relative performance table for the major charts:

As you can see the German Dax continues to be the strongest, followed by the Nasdaq 100 and the S&P 100. The biggest movers are Copper, Gold and the Russell 2000 small caps, which are still below their zero lines, but are making strong recoveries.

Copper's (HG) chart is interesting as it's managed to form a higher bottom and breakout of it's downtrend after trading around it's three year up trend line since May. The cumulative volume has also given an initial buy signal on the weekly chart. There is significant resistance in the 3.7 to 4 range, but it's good to see it back in Stage 1.

The Dollar Index (DX) has broken below it's recent swing low, the one year uptrend line and the 30 week WMA and is now in Stage 3A. Cumulative volume has also given a sell signal, so a positive for commodities like Gold (GC) which has broken out strongly in the last few weeks and is now looking to test the March and November swing highs around the 1800 level.

The US 30 Year Treasuries chart is also interesting, as it's been consolidating above it's Stage 2 continuation breakout from early May and has pulled back close to it's 30 Week WMA for the second time in just over a month. The two year up trend line is still in play and it looks like it wants to test it again. There is also horizontal support in the previous stage 3 range from the last quarter of 2011 and early part of 2012 which would support the price if it does break down from here. The Mansfield RS is also negative, so I'm going to rate this a Stage 2B- as the signs point towards it's being close to breaking down into Stage 3 again, but it's not there yet as the trend could still hold.

 

[isatrader]

Futures Relative Performance

It's been a month since I updated the Futures relative performance due some software issues with the OSX Mountain Lion upgrade. But I've found a slow way around it until ProTA fix the code to work with it properly again. So I'll probably only update it once a month as has taken about an hour to do manually.

Anyway, Soybean Meal (SM) continues to hold the top spot followed by Wheat (W), Soybeans (S), Corn (C) and Oats (O). The biggest mover this month is Silver (SI) which has moved from third from the bottom at 25th in the table, all the way to 7th, and has moved above it's zero line as well. Cocoa (CC) has also moved 14 places to postive RS from 20th to 6th. Gold (GC) and Platinum (PL) have moved almost as far, moving 12 and 13 places up the table to 10th and 11th spot; though their Mansfield RS hasn't gone above the zero line yet, but it's very close.

Coffee (KC) has now dropped to the bottom of the table, followed by Orange Juice (OJ) and Sugar which has had a really big fall in ranking.

So 7 of the 27 are now outperforming the S&P 500 and all are commodities, which is a good sign as it's an area that's underperformed for a long time.

Here's the RS table and the attached are the thumbnail charts in order of relative performance.

 

[isatrader]

UK FTSE 350 Sectors

For those that want to play the UK stocks, attached is the UK FTSE 350 Sectors charts and below is the relative strength table in order of strength.

Chemicals (NMX1350) still tops the list 4 months later since my last update at the end of April. Followed by Life Insurance (NMX8570), Software and Computer Services (NMX9530), Automobiles and Parts (NMX3350) and Electronic and Electrical Equipment (NMX2730).

At the bottom is still industrial Metals, followed by Mining (NMX1770) and Oil and Gas Producers (NMX0530) which might help explain the FTSE's under performance as Mining and Oil and Gas Producers make up a sizable percentage of the index.

 

[isatrader]

I've updated the market breadth charts in my other thread and done comparisons of when the readings got to these levels before. I think it's quite supportive of the Stage 2 continuation for the medium term, although there's near term risk as the short term percentage of stocks above their 50 day moving average is approaching the top of it's historical range. Here's the link: http://www.trade2win.com/boards/technical-analysis/147476-market-breadth-8.html#post1963260

 

[lplate]

Re: UK - BRBY stage 3 breakdown

Isa trader
Thanks for all your effort with your regular updates.
From the UK low-ranking sector Personal Goods comes stage 3 breakdown on a profits warning from global luxury fashion chain (consumer cyclical sector) now at 1065p
Burberry Group PLC, UK:BRBY (BRBY.L on some sites) - 5 year weekly - BigCharts.com
This is an example of where any lingering holders waiting for a continuation break over 1600 should sell any remaining stock, having hopefully lightened up on previous breaks of the 30 week SMA in the past year e.g. 1300p
I post this as an demo, though also wonder, as this is a global brand, if it suggests caution on the recently buoyant US upmarket apparel sector.