Stan Weinstein's Stage Analysis

[goodtyneguy]

Anyone for cotton pickin ?

Inverse H&S and "W" pattern, can someone check the RS. Plenty of potential in this one!

Page 332 shows an example of an orange juice trade, there was overhead resistance and the volume did not look very good on the breakout. Have we any evidence to say that we can ignore these with regard to futures trading?

 

[Routy]

Hi all

Fantastic thread - I've only just discovered it since reading Stan Weinstein's book very recently.

I'm very keen to try it out as it seems to be the best trading / investment (2 - 8 month) strategy I have come across.

As a novice to this method I'm looking at all sorts of potentials - what do people think of this chart - would you wait for a pullback?

My very crude method to spot potentials

a) 26 week breakouts
b) 52 week breakouts

and see if they fit with Stan's criteria.

Is it easier (or less risky) to wait for the pullback and invest once it starts rising again (as long as a higher low than breakout)?

Thanks anyone who can help.

Routy

 

[Routy]

P.S. Blue Star (from last nights above chart) has risen again since last nights chart to 0.5 currently +17% - 10.36 am.

Thanks

 

[isatrader]

Hi all

Fantastic thread - I've only just discovered it since reading Stan Weinstein's book very recently.

I'm very keen to try it out as it seems to be the best trading / investment (2 - 8 month) strategy I have come across.

As a novice to this method I'm looking at all sorts of potentials - what do people think of this chart - would you wait for a pullback?

My very crude method to spot potentials

a) 26 week breakouts
b) 52 week breakouts

and see if they fit with Stan's criteria.

Is it easier (or less risky) to wait for the pullback and invest once it starts rising again (as long as a higher low than breakout)?

Thanks anyone who can help.

Routy

Hi Routy, thanks for posting and I'm glad you're enjoying the thread. With regards to Blue Star (BLU) it's not really suitable for the method as it is a penny stock, which are for gambling, and not trading. As they can move huge percentages in either direction very quickly. You can of course still apply the methods principles to it, but you have no way of setting an appropriate stop loss due to the lack of liquidity in the stock and so could make a huge loss on it just as easily as a huge profit - hence why it's gambling imo.

Currently it's only just moved into Stage 1A in the last two days on a dramatic increase of volume, however, the 30 week MA is still falling and so even though it's broken above it's small base, Weinstein's method would put it as too early to consider yet, as it's one of Stan's firm rules that you mustn't buy a breakout when the 30 week MA is still declining.

Sub-penny stocks are not the kind of stocks that we look at on this thread, but as I said you can certainly apply the basic principles of Weinstein's method to them, if that's the path you want to take, as everyone has their own learning experience at the end of the day, and I was myself tempted early on in my trading education by the huge percentage moves that they offer, as I imagine a lot of beginners are. But soon learnt the downsides that they bring as well and moved on.

You mentioned that you read the book recently, so I'd recommend reading it again and taking notes, and then read through the thread from the beginning. As there's over a year and half of discussions on here that will answer a lot of your questions from reading the book, plus interviews, articles and hundreds of examples. The opening post has links to a lot of the key posts here: http://www.trade2win.com/boards/technical-analysis/134944-stan-weinsteins-stage-analysis.html#post1675606, and so I suggest taking it all in and then begin by paper trading or by trading only a very small account.

Good luck.

 

[Routy]

isatrader

Thanks very much for the advice - I'll read the thread and book again.

Thanks again

Routy

 

[isatrader]

Re: Anyone for cotton pickin ?

Inverse H&S and "W" pattern, can someone check the RS. Plenty of potential in this one!

Page 332 shows an example of an orange juice trade, there was overhead resistance and the volume did not look very good on the breakout. Have we any evidence to say that we can ignore these with regard to futures trading?

Yep cotton like many commodities can be a big mover when it gets some momentum. I've attached the continuous futures charts for you as they give the proper volume, which has been accumulating well since the breakout at around double the average. Relative performance versus the S&P 500 went positive following the breakout so I'd put this in early Stage 2A.

With regards to the resistance question, it is the same for commodities as it is for stocks as far as I know, so you do need to be mindful of it. But a technique not part of the method, but that I've found useful for gauging the resistance's importance, is to view the Ichimoku cloud (which is a dynamic way of seeing support and resistance) on the weekly and daily charts. Which in Cotton's case shows that price has just broken out of the weekly cloud and so the resistance strength is weak enough for it to advance from here, and so this looks to have potential for a good Stage 2 advance.

 

[goodtyneguy]

Re: Anyone for cotton pickin ?

Yep cotton like many commodities can be a big mover when it gets some momentum. I've attached the continuous futures charts for you as they give the proper volume, which has been accumulating well since the breakout at around double the average. Relative performance versus the S&P 500 went positive following the breakout so I'd put this in early Stage 2A.

With regards to the resistance question, it is the same for commodities as it is for stocks as far as I know, so you do need to be mindful of it. But a technique not part of the method, but that I've found useful for gauging the resistance's importance, is to view the Ichimoku cloud (which is a dynamic way of seeing support and resistance) on the weekly and daily charts. Which in Cotton's case shows that price has just broken out of the weekly cloud and so the resistance strength is weak enough for it to advance from here, and so this looks to have potential for a good Stage 2 advance.

Thanks ISA, I was wondering if the continuous commodity charts were available in PRT. Have n't got around to doing that yet. Hopefully sometime today.

 

[Routy]

isatrader

For my education is this now into stage 2?

Is it worth considering from the chart (the sector is positive)?
It finished up 6.5% today at 175.5 on 1.8 million volume.


Thanks again

Routy

 

[Routy]

Hi

Apologies - this is a better graph showing tonight's close.

Thanks

Routy

 

[isatrader]

isatrader

For my education is this now into stage 2?

Is it worth considering from the chart (the sector is positive)?
It finished up 6.5% today at 175.5 on 1.8 million volume.


Thanks again

Routy

It's been in Stage 2 for two months since the weekly close above the Stage 1 range on 7th December imo. So it has moved 113% already and hence would be considered Stage 2B now and so a hold late in the Stage 2 uptrend. The fact that it's gone parabolic would mean it would be sensible to take profits at this point if you'd got in at the Stage 2 entry point. But you certainly wouldn't be considering buying here as it's very extended from it's moving averages.

 

[Routy]

Hi

Fantastic - thanks very much!

Routy

 

[Locked in]

Concurrent Computer Corp

I was thinking this morning about the technology sector- What Weinstein said in his latest interview was that he believed Apple would drive down the entire market- however, it seems that people have just exited appl and added positions in other stocks. Not that he is wrong for the future, just thus far.. My question to you all is if you take Apple out of the equation, how does the technology sector look in terms of the masfield relative strength? I was trying to work that out this morning on chartmill but couldn't seem to crack it. Just wondering if anyone has the tools to do so.

The reason I ask is because I found a nice looking chart- Concurrent Computer Corp (CCUR) which looks good on all levels imo. I believe (if i am calculating correctly) that the RS M is at around 6.04 v the SPY and has had a HUGE spike in volume after a recent earnings beat- At least a 30X increase. The stock is also breaking out into aprox 4 and a half year highs. It is over extended at the moment but it will be on my watchlist looking for a pullback within the next few weeks.

When looking at the daily chart, the company has been a bull for the last year and has finally broken out on the weekly- What do you all think?

 

[isatrader]

Re: Concurrent Computer Corp

I was thinking this morning about the technology sector- What Weinstein said in his latest interview was that he believed Apple would drive down the entire market- however, it seems that people have just exited appl and added positions in other stocks. Not that he is wrong for the future, just thus far.. My question to you all is if you take Apple out of the equation, how does the technology sector look in terms of the masfield relative strength? I was trying to work that out this morning on chartmill but couldn't seem to crack it. Just wondering if anyone has the tools to do so.

You can't take Apple out in the chartmill sector relative strength as it just gives you the average for the whole sector. But if you make your own list up like I did a while back, then you can order by relative strength. Below is the XLK components (as of 12th Sept 2012), so is a bit out of date as some of the components might have changed and not be in it anymore. But the relative performance is up to date and is ordered by the strongest to the weakest, and shows that 28 out of 54 stocks (51.85%) in the tech sector are above their zero lines. So it's fairly evenly balanced, whereas financials for example has 58 out of 83 stocks (69.88%) above their zero lines and so is very strong.

Or you can look at the tech sector for the entire US market on an equal weighted basis in the market breadth thread that shows that currently (as of last Friday's close) 67.29% of stocks in the technology sector are above their 150 day (30 week) MA - which is bullish territory.

The reason I ask is because I found a nice looking chart- Concurrent Computer Corp (CCUR) which looks good on all levels imo. I believe (if i am calculating correctly) that the RS M is at around 6.04 v the SPY and has had a HUGE spike in volume after a recent earnings beat- At least a 30X increase. The stock is also breaking out into aprox 4 and a half year highs. It is over extended at the moment but it will be on my watchlist looking for a pullback within the next few weeks.

When looking at the daily chart, the company has been a bull for the last year and has finally broken out on the weekly- What do you all think?

Attached is the monthly, weekly, daily and the P&F chart for you. Like you said it's very extended in Stage 2 that began around June 2012 as you can see from the charts. The monthly chart is interesting though, as it shows a multi-year stage 1 range that has been cleared on decent volume. So this would be interesting on a pullback to the new high breakout level imo for a longer term investor position.

 

[isatrader]

Watchlist

There was eight breakouts and zero breakdowns today in the S&P 500, but none of the breakouts where suitable imo for the method. So I cast the net a bit further over the S&P 400 Midcaps and the S&P 600 Smallcaps and found Take-Two Interactive (TTWO). Which made a continuation move today in early Stage 2, as the initial Stage 2A breakout was in early December, but it immediately pulled back strongly below the breakout level to the 30 week MA before putting in a swing low and beginning it's current advance. And so forming a stage 1 range mostly above the 30 week MA. Hence, today's is a secondary Stage 2 breakout or continuation move depending on how you want to define it, but it is in Stage 2 now.

The breakout had good volume and the relative performance versus the S&P 500 is strengthening above the zero line and it closed strongly on the day. So I'll be interested to watch this one until the end of the week to see if it holds the breakout, as if it does then it might be worth considering for a retest of it's 2011 highs. Although the risk reward is stretched currently at almost 7 x ATR(200) risk, so I'd be looking for a pullback entry to consider it as a trader pick, as I look for less than half that risk personally.

The other watchlist candidate - Ford (F) closed above yesterdays close just barely, but not above the high that I was looking for and so it's still not quite there yet, but it is close.

Another chart that caught my eye recently is Halliburton (HAL) which is in early Stage 2 above it's 2012 highs. I'm looking for a pullback towards the short term trendline at the 38 level, which was also the September high.

 

[isatrader]

Cumulative Force Index

For those that are using free prorealtime for their charts, I've coded the Cumulative Force Index into it that I've used at the bottom of my charts throughout this thread. So if you want to use it, below is the code and attached are screenshots of the settings files and the prorealtime .itf file if you want to import it in directly:

ForceIndex1 = (Close-DClose(1))*Volume

ForceIndex2 = ExponentialAverage[10](ForceIndex1)

CumulativeForceIndex = cumsum(ForceIndex2)

RETURN CumulativeForceIndex

This code creates the cumulative force index,and then you need to add a 10 simple MA to it, and finally Add a new colour zone to fill it. Attached are the screenshots of the settings and the result on the weekly chart, which iI think is quite close to my normal charts style.

 

[goodtyneguy]

Re: Cumulative Force Index

For those that are using free prorealtime for their charts, I've coded the Cumulative Force Index into it that I've used at the bottom of my charts throughout this thread. So if you want to use it, below is the code and attached are screenshots of the settings files and the prorealtime .itf file if you want to import it in directly:

ForceIndex1 = (Close-DClose(1))*Volume

ForceIndex2 = ExponentialAverage[10](ForceIndex1)

CumulativeForceIndex = cumsum(ForceIndex2)

RETURN CumulativeForceIndex

This code creates the cumulative force index,and then you need to add a 10 simple MA to it, and finally Add a new colour zone to fill it. Attached are the screenshots of the settings and the result on the weekly chart, which iI think is quite close to my normal charts style.

ISA, you're a star, I have just been setting up the charts and my watch lists in PRT. I've still not finished the watch lists but my next job was to set up the cumulative force index. Great stuff, thanks.

 

[Routy]

isatrader

Just wondering what you think of these charts for possible (small) investment / my new education in charting -

Thanks again

Routy

 

[isatrader]

Brent Crude (BZ)

An interesting sharp volume build in Brent Crude futures (BZ) has happened since the beginning of the year. It's in Stage 2 and approaching the early 2012 high, and so the volume build suggests that it could breakout to new highs. However, I've noticed something with the prorealtime charts, in that it has the option to use adjusted or unadjusted data for the charts, which is to do with the rollovers of the futures contracts. I've always used unadjusted data personally, as for the futures charts I've manually inputted the data into my chart software each weekend and so haven't had the ability to do an adjusted chart. I can see why an adjusted chart would be useful as you can get gaps when contracts rollover, but by altering the historical prices you lose the ability to do accurate support and resistance levels, which are important in Weinstein's method. Take the Brent charts attached - you can see on the unadjusted chart that the April 2011 high was the resistance level that the February 2012 price action reacted too. Whereas on the adjusted chart it looks like it made a Stage 2 continuation move in Feb 2012, as it does now. But the unadjusted chart shows that it still hasn't cleared the September high and so is the important resistance level to watch for a breakout to a new Stage 2 continuation move - which the volume build suggests it will imo.

So it is something to consider on futures charts and a subject that I want to do more research on, as well as whether stock charts should be unadjusted as well for dividends except for stock splits. As dividend adjusted charts also distort support and resistance levels.

P.S. Routy, I've had a quick look at your charts and will give you an answer later on as to the Stages as have a busy day. But at a quick glance LWB would be my favourite of the four because of the volume pickup and the relative performance is breaking above the weekly zero line and it's just broken above it's most recent swing high.

 

[Routy]

Hi

Brilliant thanks - glad you said LWB - that was my - favourite - do I need to wait a pullback or buy 50 % now and 50% on the pullback - have I missed the boat?

Cheers

Richard

 

[lplate]

isatrader
Just wondering what you think of these charts for possible (small) investment / my new education in charting -
Thanks again
Routy

Hi Routy, my 2pen'th is that OCDO is of interest to me as looking one of those few stocks where you could have felt quite good about buying a downtrend break Nov 2012, instead of a horizontal. The break (and prob gap) followed a successful fundraising. (I closed my short there.) OCDO sketch wkly 2 yr ADVFN
Not confident to buy the 90s in December, buying above 100 in Jan would have been more attractive, and the distance to 135 would still have remained 20-30 points.
Also, analysts have been bearish about the business model (till today!) so, with a string of good news in 2013, this is also a case where a chart has anticipated a better picture than the fundamentals suggested.
Paradoxically this could be a share where a break of a higher level still, 135, could cause a move to 250p, so yes you have found a share of "academic" interest, and very likely a money interest also!