Stan Weinstein's Stage Analysis

thuang68

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Hi thuang68, thanks for joining in. I've been very pleased with my forward testing so far and have recently doubled my test account size so that I can add more picks to my portfolio as we move further into Stage 2. I've been keeping a journal on Big Mikes here: Trading breakouts with stage analysis - Trading Journals, so you can see how I'm doing in detail on there. It has some of the same stuff as this thread as I put the major charts on there as well, but it has other stuff such as market breadth charts and my portfolio updates as well as it's my journal.

But for quick stats I'm currently up around 7% since my first Weinstein pick on 27th October 11 and from the 19 positions so far I have closed 7 positions for 5 wins and 2 loses. So I now have 12 open positions of which 11 are positive so far and 1 is negative at -2.14% currently.

The book can tell you how to find good picks and when to sell them, but it doesn't tell you how to manage your portfolio. So I wouldn't judge the method on the percentage gain I've achieved as that's down to me alone. But I think the number of winning picks over losing picks shows how good it is.



Read Chapter 6: When to Sell - page 178 onwards as this goes into great detail of where to place your stops as an investor or as a trader. Basically though, for the short answer an investing stop is placed under the last major support zone on the weekly chart and under the 30 week moving average, whereas the trading sell stop is for short term traders following the trader method so is placed much closer under the most recent pivot level before the breakout. I'd recommend reading through Chapter 6 and doing the quiz at the end to make sure you understand what you've read.
Thanks a lot isa for your quick answer. Will read Chapter 6 again.
 

isatrader

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Weinstein clearly likes an extended and patterned bottom formation, such as the KLAC 1B+ example, so I must re-read 96-103 and 118-129.
From looking at page 118 again there's an important quote that is relevant to our discussion:

"First, make sure that the 30 week MA is in fine shape. It should no longer be declining and the stock should not still be below it after it breaks out above resistance. If the MA is declining, don't buy the stock even if it breaks above the neckline, and even if it moves above the MA. If the MA later stops declining, you can buy the stock on a pullback toward it. If the stock is still below the MA after it moves above the neckline, don't buy it until it also clears the MA.

If we relate this to our discussion on Copper and change the 30 week MA to the simple MA which he is referring to, you can see that it is still declining on the simple MA, whereas the weighted MA is flat to slightly up over the last 5 weeks or so as it's more sensitive to recent prices. So on my charts I use the first move to green in the weighted MA as the sign that it's entering Stage 1 and then look to consider where the possible Stage 2 breakout level may form. But I think it's useful to look at both type of MA to help define the Stage transition.
 

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isatrader

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I opened a trader position in Silver (SLV) today with it's break above the $35 resistance and downtrend line. Stage wise it looks in a similar position to where Copper was at the end of January, however the difference being that it's breaking above it's major resistance level and 200 day MA whereas Copper was still below it at it's similar point. So I'm rating it a Stage 1A breakout into a broader Stage 1 range with upside resistance in the $36 to $42.50 range to contend with. My stop loss is under the recent pivot low and 30 week WMA at $31.40
 

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isatrader

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Very well done with that pick, isa, as it looks to be paying off.
Any thoughts on TSX 60 breakout?
S&P/TSX 60 Index, XX:TX60 Advanced Chart - (TOR) XX:TX60, S&P/TSX 60 Index Stock Price - BigCharts.com
I'd say it's moving into Stage 1 with it's current breakout, but it still has a near by resistance level between 730-740 and then 760 area. It's underperformed the S&P 500 by 10% or so since the October low and has recovered a few percent, but the Mansfield relative strength is very negative still, but it is clearing it's 200 day MA which is a positive. Unless you think it's going to start to outperform, I'd personally suggest looking for something starting to show better relative performance versus the major markets.

Here's the charts
 

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isatrader

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Stage 2A - examples

Here's some new Stage 2A examples recommended in a recent GTA report for you to look through and which are moving from Stage 1B (late in the basing phase) into Stage 2A (early in the advancing phase). I've added the 50 day and 200 day simple moving averages to the daily chart to help as well, as as you can see, it's clear the stock needs to be trading above the 200 day MA and then breakout to become Stage 2A, so the breakouts that look good below that would still be in Stage 1 by my interpretation.

I'm going to try to get hold of more back issues of the GTA report so I can build a decent database of the Stages examples for us to reference. To see the previous examples of all the Stages I posted last year, go to page 3 on thread here: http://www.trade2win.com/boards/technical-analysis/134944-stan-weinsteins-stage-analysis-3.html#post1695880
 

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isatrader

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US Industry Sectors

Attached is the latest US Industry Sectors charts for analysis. I've included daily charts as well for the first time to give a shorter term view.

Financials are looking up with the XLF closing right on it's Stage 2A breakout point. The Mansfield RS is improving as well, although it is still below the zero line, but if the whole sector is moving from Stage 1B to Stage 2A then it's a good time to start looking at some individual plays from the group. Consumer Staples (XLP) and Consumer Discretionary (XLY) continue to grid higher, but Technology (XLK) still leads the pack. There were a number of negative moves this week as well with Basic Materials (XLB), Energy (XLE), Industrials (XLI) and Utilities (XLU) all finishing lower for the week.
 

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isatrader

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Attached is the latest major charts for analysis. I've added the FTSE 100, DAX and Russell 2000 to mix to broaden the comparisons.

The 30 year Treasuries chart is this weeks chart of note for me as it moved from Stage 2B- into Stage 3A- with it's close below the 30 week weighted moving average this week. I've given it a minus rating as the price is yet to close below the recent tight range below 139.75 so it could still go either way here, but the negative indicators continue to build up with increased volume on this weeks move down, the Mansfield RS is also negative and cumulative volume gave a sell signal four weeks ago and has failed to get back above it's moving average.

The Russell 2000 small cap index underperformed the S&P 500 by around 3% this week and broke below it's February consolidation range suggesting to me that people are moving out of the riskiest areas either to the sidelines or rotating into some of the larger more defensive stocks as treasuries didn't see the normal inverse correlation. So a potential warning sign there imo.

Gold and Silver also made headlines this week with a Bernanke fueled sell off, which was exacerbated by the contact rollovers in the futures as people decided to book their profits from the run up since the new year began. Both were hit hard but no major technical damage was done as Gold held above 1700 and Silver pulled back to the support of it's recent range around the $34 level. This could change if Gold closes below 1700 or Silver below $33 so it will be interesting this coming week to watch.

Copper advanced a little further towards it's Stage 2A breakout point of $4 again this week and settled the week at $3.903. I personally think this is one of the key components necessary to drive the stock market higher as if it can breakout then it will give extra weight to stocks to continue higher.

WTI Crude Oil put in a short term high at $110.55 after quite a volatile week of headlines affecting it, but the short term trend is still up as it's forming a new trading range between $105 and $110.

Finally the Dollar Index had a strong reversal following the Bernanke comments and closed the week higher. The $80 level looks to be fairly strong resistance as it's had a number of reversals around there recently, but it closed the week back above it's uptrend line so it is definitely an important one to watch this coming week as it is mostly inversely correlated with the stocks and commodities markets.
 

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isatrader

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Secondary Indicators

While the weekly chart secondary indicators still look strong, the daily chart is starting to show some divergences with the price action. The Advance Decline Line 200 day moving average has gone sideways during February while the S&P 500 has continued higher. Daily momentum has also started to roll over over the last month or so and is beginning to move lower. So some warning signs are beginning to appear on the short term chart, but as always these are secondary factors as the price action is the primary focus.
 

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isatrader

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Stage 1B - examples

My email to Stan was partially successful. I wasn't able to get hold of any back issues of the GTA from him; however, he very generously let me see the most recent report and so I can now create more examples of the sub-stages for us all. A key stage I was hoping to be able to identify better was Stage 1B (Late in base-building phase. Watch for breakout.) As once in Stage 1B the Stage 2A breakout point can be easily defined as you will see from the numerous examples below.

All the examples are from 3rd March 2012 and their current charts will more than likely be in worse shape now due to the market sell off the last few days. But the point of the examples though is to learn how to identify the stage, which for me have made it much clearer. Note the importance of being above 200 day moving average on all the examples.
 

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isatrader

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Stage 1A - examples

Attached are examples of Stage 1A - Start of a base. Needs much more time.
 

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isatrader

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Stage 1 - examples

The following are examples from the 2nd March 2012 of Stage 1 - which is classed as the Basing Phase. May begin accumulation. These are not recommendations, just examples to help you learn to define Stage 1 more accurately.
 

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