Clarification needed for Stan Weinstein's Technical Analysis

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Old Mar 17, 2014, 7:26pm   #1
 
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Clarification needed for Stan Weinstein's Technical Analysis

Hello Guys

I am new in stocks world and started online stock trading just a week back in Pakistan. Before starting trading, I read few books on technical analysis. One of them is Stan Weinstein - Secrets For Profiting In Bull And Bear Markets. I loved this book the most because as I completed the book and saw the charts of stocks in real life, they were all going through the stages defined by Stan, it was surprising for me because I studied finance but what I found is against what fundamental theories say. I realized what works in stocks is not fundamental but technical.

However I need a few clarification in order to apply perfectly what I learned from his book. I request experts here to answer the following question so that I can make use of Stan's method in better way.

1. Are Relative Strength Line in Stan's book and Relative Strength Index the same? I use Reuters.com for charting purpose and I do not find Relative Strength Line there but RSI. Here is the direct link of chart for example.

http://www.reuters.com/finance/stock...symbol=GATX.KA

if RSL is not RSI, please tell what indicator at Reuters I can use in replacement of RSL.

If Reuters is not enough for RSL, I have another charting service below that I can use for Pakistani stocks.

http://analytics.kse.com.pk/Graphica...ndanalysis.php

You can see all available indicators by clicking on the first button in second line.

2. Stan in the book shows graphs for more than a month in almost all examples. But I see stocks going through all stages in at most a month. Each stage takes few days to complete and stock moves to another stage immediately. Is it normal that fast or there is something I am missing to understand charts. I am attaching a list of Pakistani Stock, you can search any of them by symbol on Reuters and see the pattern.

4. As I just told the stages go so fast, should I still use 30 week MA for Stan's technical analysis? Please note that I am swing trader. I try to buy stocks at the breakout on stage 2 and sell them after 5 to 10 days, at the beginning for stage 3. I find something wrong with 30 week MA for such a fast Pakistani stock market because in almost all stock I check stock prices are much above 30 week MA. Can I use 50-days MA as an alternative or what?

3. Should I buy stock that have less free float shares? They seem to be less liquid. But those small number of sellers have greater control over price when buyers are there.

Please answer the question above. I will be very thankful to you. Waiting for response...
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Last edited by Shenzo; Mar 17, 2014 at 7:40pm.
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Old Mar 18, 2014, 10:48pm   #2
 
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Originally Posted by Shenzo View Post
Hello Guys

I am new in stocks world and started online stock trading just a week back in Pakistan. Before starting trading, I read few books on technical analysis. One of them is Stan Weinstein - Secrets For Profiting In Bull And Bear Markets. I loved this book the most because as I completed the book and saw the charts of stocks in real life, they were all going through the stages defined by Stan, it was surprising for me because I studied finance but what I found is against what fundamental theories say. I realized what works in stocks is not fundamental but technical.

However I need a few clarification in order to apply perfectly what I learned from his book. I request experts here to answer the following question so that I can make use of Stan's method in better way.

1. Are Relative Strength Line in Stan's book and Relative Strength Index the same? I use Reuters.com for charting purpose and I do not find Relative Strength Line there but RSI. Here is the direct link of chart for example.

http://www.reuters.com/finance/stock...symbol=GATX.KA

if RSL is not RSI, please tell what indicator at Reuters I can use in replacement of RSL.

If Reuters is not enough for RSL, I have another charting service below that I can use for Pakistani stocks.

http://analytics.kse.com.pk/Graphica...ndanalysis.php

You can see all available indicators by clicking on the first button in second line.

2. Stan in the book shows graphs for more than a month in almost all examples. But I see stocks going through all stages in at most a month. Each stage takes few days to complete and stock moves to another stage immediately. Is it normal that fast or there is something I am missing to understand charts. I am attaching a list of Pakistani Stock, you can search any of them by symbol on Reuters and see the pattern.

4. As I just told the stages go so fast, should I still use 30 week MA for Stan's technical analysis? Please note that I am swing trader. I try to buy stocks at the breakout on stage 2 and sell them after 5 to 10 days, at the beginning for stage 3. I find something wrong with 30 week MA for such a fast Pakistani stock market because in almost all stock I check stock prices are much above 30 week MA. Can I use 50-days MA as an alternative or what?

3. Should I buy stock that have less free float shares? They seem to be less liquid. But those small number of sellers have greater control over price when buyers are there.

Please answer the question above. I will be very thankful to you. Waiting for response...
with regard to 1. Weinstein in his book makes it quite clear that relative strength is not the RSI. You would need to check what reuters uses to plot the relative strength, unfortunately I cant help you there.

as for 2. you are not using weekly charts which is what weinstein recommends, again you may want to have a look at the book again to remind yourself of his methods. Its not normal for a stock to be going through various phases in a few days, as your weekly charts would just be ignoring them, what timeframe are you using?

3. I prefer more liquid stocks, but thats just a personal preference

4. the 30 ma is used for weekly charts, it would seem as though you're not looking at weekly charts in which case you will need to possibly adjust the MA setting. You can still use the method for smaller timescales but the 30MA may not be as effective
a 30 period MA on a 2hrly chart works quite well I've found, not sure about your stocks however

hope this helps.
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Old Mar 19, 2014, 5:07am   #3
 
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Shenzo started this thread Thank you very much malaguti for your descriptive answer. I am using time frame of 6 months for analyzing the stage and 3 years to know the resistance. I searched again and did not find anything in his book stating that it is not normal for stock to go through the stages so fast. No matter what stock I pick, they all have such a shorter period for stages.

I am manually calculating Beta for the stock taking the last month's daily historical prices data as an alternative of relative strength. By definition RSI and Beta seem to be the same.
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