Stan Weinstein's Stage Analysis

[isatrader]

Hello ISA and fellow traders, I am a newbie. I have read and re-read Stan Weinstein's book over and over. I have paper traded for last 5 months and after doing relatively well I finally started trading with the green stuff.

I have been following this thread for sometime now and it has been very useful.

I know you have mentioned earlier that volume increase at the time of the breakout is not important. But we should see increased volume after the breakout and the pullback should be on low volume.

I bought AET recently and as of today (2/13) it has not shown any volume increase and seems like its going to close lower second time in three weeks. What do you think about that. How should I analyse such situations.

Any help would be greatly appreciated.

Hi anupam384, thanks for posting for the first time on here. I've had a look at the AET chart and marked it up as I see it. I've got the Stage 2 breakout point as the close above the swing high on the 12/12/12 at 45.91

The volume wasn't great on the daily when it broke out. Less than twice the average, which is quite low, as the target volume on the breakout day is for at least three times the average and twice the average on the weekly chart if I remember correctly. The cumulative volume however has been building and has stayed above it's weekly moving average since September.

Relative performance versus the S&P 500 has been reasonable though and it's slightly outperformed since the breakout point, and has stayed above it's zero line.

It's now reached it's first major point of resistance since the Stage 2 breakout, which is the March 2012 high at 51.14 and saw a pullback from it after getting close on Tuesday at 51.10, so a pullback here would be very normal, as it's a natural point for people to take profits as there will be a lot of targets here, and for some selling to come in with people trying to gamble that it will a top. But with regards to the method other than the volume issue it hasn't done much else wrong yet. So you could take some profits as Weinstein says not to hold onto a stock if it doesn't see a pickup in volume following the breakout and AET has actually had lower than average volume since the breakout, which isn't a good sign. It doesn't mean it couldn't breakout further though, but as far the method is concerned it's a average C- stock, and so you need to decide whether to let it play out until it hits your trailing stop loss, or to move on to something else.

When to sell is the hard part of the process and I've made many mistakes myself over the last few years and sold positions too early that are still grinding higher in Stage 2 on low volume to this day. So it's always a judgement call at this point that never seems to get any easier. Good luck with it.

 

[Routy]

isatrader

Hi

I've signed to to sharehunter - will be interesting to see how it goes...

How do you think LWB is doing - it seems to have consolidated for a few days...

Thanks

Routy

 

[isatrader]

How do you think LWB is doing - it seems to have consolidated for a few days...

It seems to be consolidating around the early 2012 highs following it's big move the previous week. Which is quite normal imo, but personally I'd want to see it consolidate for longer at this level or pullback to support around the 63 zone and form a new swing low, as there's no entry point currently imo, as it's very extended from the previous swing low at around 8 x ATR.

 

[Routy]

Hi

Great - thanks.

Routy

 

[isatrader]

Solar

To follow up Rewardz post from a month ago here: http://www.trade2win.com/boards/technical-analysis/134944-stan-weinsteins-stage-analysis-97.html#post2050692. TAN the Solar sector ETF made a strong continuation move today on very good volume. I looked previously at the top ten component stocks from the ETF and of those FSLR and SPWR could be big reasons for the breakout, as they have made very strong Stage 2 continuation moves themselves this week. See attached.

 

[anupam384]

Hi anupam384, thanks for posting for the first time on here. I've had a look at the AET chart and marked it up as I see it. I've got the Stage 2 breakout point as the close above the swing high on the 12/12/12 at 45.91

The volume wasn't great on the daily when it broke out. Less than twice the average, which is quite low, as the target volume on the breakout day is for at least three times the average and twice the average on the weekly chart if I remember correctly. The cumulative volume however has been building and has stayed above it's weekly moving average since September.

Relative performance versus the S&P 500 has been reasonable though and it's slightly outperformed since the breakout point, and has stayed above it's zero line.

It's now reached it's first major point of resistance since the Stage 2 breakout, which is the March 2012 high at 51.14 and saw a pullback from it after getting close on Tuesday at 51.10, so a pullback here would be very normal, as it's a natural point for people to take profits as there will be a lot of targets here, and for some selling to come in with people trying to gamble that it will a top. But with regards to the method other than the volume issue it hasn't done much else wrong yet. So you could take some profits as Weinstein says not to hold onto a stock if it doesn't see a pickup in volume following the breakout and AET has actually had lower than average volume since the breakout, which isn't a good sign. It doesn't mean it couldn't breakout further though, but as far the method is concerned it's a average C- stock, and so you need to decide whether to let it play out until it hits your trailing stop loss, or to move on to something else.

When to sell is the hard part of the process and I've made many mistakes myself over the last few years and sold positions too early that are still grinding higher in Stage 2 on low volume to this day. So it's always a judgement call at this point that never seems to get any easier. Good luck with it.

Thanks ISA for your prompt and thorough reply. I see what you are saying and its always difficult to say what will happen going forward. Since I trade deep in the money options instead of shares (because of capital constraints) and I bought 1 option, I think I dont have the option to sell half of my position , I am gonna stick with this baby and see where it takes me.

But I know one thing for sure, if I dump it right now, this sucker will take off like crazy in a day or two.

My next targets are SWK and BSX as soon as they rise above their recent previous highs. They look ready to take off (atleast in my head)

 

[isatrader]

Momentum Index (MI)

It's been a little while since I last posted the Momentum Index (MI) - which is the 200 day MA of the daily advances minus the declines in the NYSE. And also the other Advance Decline Line measures that are referenced in the GTA reports. All are confirming the uptrend so far with no major warning signs to be aware of currently.

For those who want to keep an eye on this more regularly. I post it most weekends in the market breadth thread along with the other internals measures here: http://www.trade2win.com/boards/technical-analysis/147476-market-breadth-25.html#post2066248

 

[isatrader]

Attached is the updated major charts and the relative performance table. The FTSE 100 takes over the top spot followed by the Russell 2000 Small Caps as the German Dax has pulled back below it's 50 day MA since stalling at the start of the year.

 

[lplate]

Thanks as always for the effort that goes into that set of charts, isatrader.
Here is sharehunter's view from 10th Feb. on FTSE. Stockmarket could fall . . .
I have criticised adding bits to the simple stage analysis, but even I notice the SPX is at the top of the ascending channel on the weekly, with candles shrinking, and looks like it needs a pullback before (possibly) rising again.
What do we do in such a situation? Leave on any very strong stage 2 positions we hold and manage them as usual, but a share would need to be extra special at this moment to add any new long positions.

 

[isatrader]

US Industry Sectors

It's been a few weeks since I last posted the US Industry Sector charts. Attached is the the weekly and daily charts of the major sectors and below is the relative performance table in order of strength. Five of the nine sectors continue to be in a price discovery phase, making new highs, lead in strength by the financials.

 

[goodtyneguy]

Check out XLF constituent NYSE:HCBK as a continuation buy prospect. Trader stop would be under the pivot low of 7.79 with no real resistance to speak off until 11.33 gives a decent risk to reward ratio of about 1 to 2.5.

 

[isatrader]

Breakdowns and Breakouts - S&P 500

I set up a custom scan to find the P&F breakouts and breakdowns in the S&P 500 each and have been using it to look for potential Stage 2 breakouts or Stage 4 breakdown candidates. Most of them aren't suitable, but the list is relatively small each day, normally less than 10, and so is a quick way of searching for potential candidates. And I also find it useful as it shows which sectors are displaying strength or weakness and whether breakouts are outnumbering breakdowns. For example, last week you can see that the Consumer Discretionary sector had seven breakouts, whereas Materials had zero, but did have a breakdown. Also, there was almost 3 to 1 in favour of breakouts over breakdowns.

I'll try and post them more regularly so you can look at the charts in your own software and see if you think any have potential for the method. But from a quick look through the weekly charts of the breakouts below I think the following are interesting in different phases of Stage 2: HAS, HCP, BIIB, UPS, D, and PNW. As we have one early Stage 2 breakout, and number of breakouts/attempted breakouts to new highs. The breakdowns of interest imo are WFM which is in Stage 3B, COF which moved to Stage 4, and ALXN which made a Stage 4 continuation move.

Week ending 15th February 2013

Breakouts

Breakdowns

 

[isatrader]

Watchlist

Two of today's early breakouts might be of interest - FSLR and PBCT. See attached weekly charts.

 

[goodtyneguy]

Continuation buy on XLF constituent VTR as it pulls back to the BO level.

Some other prospective continuation buys from XLF are HCN, MTB, HCN and HPC. Clear skies above on these babies, be mindful of diversification though.

Volume pushing COT up to the BO level today after a long base, impotent resistance above, prospective investor or trader opportunity.

 

[isatrader]

One for goodtyneguy. Cotton (CT) made it's first continuation move since it's Stage 2 breakout yesterday by closing above 84 and is shaping up well with positive relative performance on the daily chart and cumulative volume is rising and above it's moving average. Attached is the charts.

Disclosure: I've gone long Cotton since posting this in the May Contract at 84.56 with a 2 x ATR(200) stop loss at 79.92

 

[goodtyneguy]

One for goodtyneguy. Cotton (CT) made it's first continuation move since it's Stage 2 breakout yesterday by closing above 84 and is shaping up well with positive relative performance on the daily chart and cumulative volume is rising and above it's moving average. Attached is the charts.

Disclosure: I've gone long Cotton since posting this in the May Contract at 84.56 with a 2 x ATR(200) stop loss at 79.92

ISA, that's odd, my daily PRT chart shows the break out level to be 85.40, that's why I'm not in?

 

[isatrader]

ISA, that's odd, my daily PRT chart shows the break out level to be 85.40, that's why I'm not in?

You've got the rollover adjustment turned on which changes the prices of the previous months and hence messes up support and resistance levels.

Go to options, Adjust historical data, and unselect "On rollover, for continuous futures (XXXX)" to get the prices it actually traded at. You should turn off the After dividends for stocks as well imo.

 

[goodtyneguy]

You've got the rollover adjustment turned on which changes the prices of the previous months and hence messes up support and resistance levels.

Go to options, Adjust historical data, and unselect "On rollover, for continuous futures (XXXX)" to get the prices it actually traded at. You should turn off the After dividends for stocks as well imo.

ah, that's better.

While I'm here, GBP/CHF looks like it's breaking into stage 4 and cable does n't look far behind. I'm already in cable, not on a weinstein trade though. I've no volume though.

 

[isatrader]

Here's two of today's four P&F breakdowns that are interesting imo. GRMN and NEM

 

[goodtyneguy]

Re: Breakdowns and Breakouts - S&P 500

I set up a custom scan to find the P&F breakouts and breakdowns in the S&P 500 each and have been using it to look for potential Stage 2 breakouts or Stage 4 breakdown candidates. Most of them aren't suitable, but the list is relatively small each day, normally less than 10, and so is a quick way of searching for potential candidates. And I also find it useful as it shows which sectors are displaying strength or weakness and whether breakouts are outnumbering breakdowns. For example, last week you can see that the Consumer Discretionary sector had seven breakouts, whereas Materials had zero, but did have a breakdown. Also, there was almost 3 to 1 in favour of breakouts over breakdowns.

I'll try and post them more regularly so you can look at the charts in your own software and see if you think any have potential for the method. But from a quick look through the weekly charts of the breakouts below I think the following are interesting in different phases of Stage 2: HAS, HCP, BIIB, UPS, D, and PNW. As we have one early Stage 2 breakout, and number of breakouts/attempted breakouts to new highs. The breakdowns of interest imo are WFM which is in Stage 3B, COF which moved to Stage 4, and ALXN which made a Stage 4 continuation move.

Week ending 15th February 2013

Breakouts

Breakdowns

I've also been thinking about the best way to screen for opportunities without having to spend hours going through charts. I started with the idea of making lists of the constituents of the strongest and weakest sector SPDR ETFs and then manually go through the charts picking the strongest and weakest stocks respectively. That is how I found the XLF constituents I posted up recently. However the sector ETFs don't include all the stocks in the sectors, it is a bit labourious and the constituents change now and again. I did think about trying to code a screener in PRT for the methods volume characteristics but I think we've established that this is not very reliable now, although it still might be useful.

Your idea seems to be much better, I presume you are using a screener included in your ProTA package. I don't know anything about P&F charts yet but do you reckon it could be coded into PRT?