Stan Weinstein's Stage Analysis

Rewardz

Junior member
31 2
I question Stans comments about markets being in stage 4. The interview on financial sense occured after markets broke BELOW their 30 week averages.

To Trade succesfully one must be flexible and listen to the markets.

The 30 week is rising and has NOTflattened out.

The Sp500 and other indexes ave regained their 30 week and closed weekly above. The SP500 continues to make a higher move....Still needs to break to new 52 week highs, but given the action on Europe indexes and China, I would say we saw a false breakdown.

Still hedge with shorts in stage 4, but aggressive about my stage 2 buying.

If SPX goes back UNDER its 150, then its a whole new story......

Happy Trading.
 

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isatrader

Senior member
2,951 129
I question Stans comments about markets being in stage 4. The interview on financial sense occurred after markets broke BELOW their 30 week averages.

To Trade successfully one must be flexible and listen to the markets.

The 30 week is rising and has NOT flattened out.

The Sp500 and other indexes ave regained their 30 week and closed weekly above. The SP500 continues to make a higher move....Still needs to break to new 52 week highs, but given the action on Europe indexes and China, I would say we saw a false breakdown.

Still hedge with shorts in stage 4, but aggressive about my stage 2 buying.

If SPX goes back UNDER its 150, then its a whole new story......

Happy Trading.
I think what I've taken from listening to the interviews and reading various GTA samples is that he has a much longer time horizon than the majority of people on here and hence focuses on long term investing and isn't interested in trading per se. I agree it was a false breakdown to Stage 4A and felt the call was very early myself as from the examples I've created from his GTA newsletter I only had it moving into Stage 3, and posted the week before the breakdown that it was in Stage 2B-. But as I've since learnt, the call was more broad and wasn't based solely on the S&P 500, but on all of the major US indexes together and was made due to his various gauges like the momentum index breaking down as well. Some of these have rebounded with the stock markets recent rally, but others haven't and continue to show large negative divergences with the price action. One thing he said in his reply to my friends email was that it doesn't matter whether it's Stage 3 or Stage 4A, but that it's far more important to get that it's a time to be defensive, which it's seems like you are to a certain extent, even though you say you being aggressive with your Stage 2 buying, as you have open both long and short positions.

Attached is my chart with a markup of the larger Stage 3 I see developing, following the failed 4A breakdown. I have the top of the Stage 3 range set to the September high currently, as we are yet to put in a more recent swing high. But once we do, I will adjust it to that point.

Cumulative volume continues to be on a weekly sell signal (below it's 9 week MA), the 30 week MA has been very flat for months, but has ticked up slightly the last few weeks, and relative performance versus the 30 year Treasuries is only slightly positive. The price action is testing the downtrend line today, so will be interesting to see if it can put in a lower high here.
 

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goodtyneguy

Active member
146 9
Great to hear all the thought processes going on here, thanks and much appreciated.

I am tending towards Rewardz's false break down assumption please see attached chart.

Went short the DJI today for short term trade though, who knows, could end up a position trade.
 

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isatrader

Senior member
2,951 129
Great to hear all the thought processes going on here, much appreciated.

I am tending towards RewardZ's false break down assumption please attached chart.
I did a post about that very chart earlier today on the Market Breadth thread here: http://www.trade2win.com/boards/technical-analysis/147476-market-breadth-19.html#post2032648

The higher high breakout has happened during the last two consolidation periods, and has been followed quickly by a sharper sell-off than the initial sell-off. So my question was will it happen again or is it different this time?



Also here's the Advance Decline Momentum Index and Advance Decline 10 Day MA Oscillator to give a different perspective to the same data. The Momentum Index (red line) shows a large divergence with S&P 500 price action (light grey line) during the recent rally.



One final set of charts is the Advance Decline Volume Data. The top chart is the Cumulative NYSE Advance Decline Volume divided by the NYSE Primary Market Total Volume. The second chart is the 200 day moving average of the Advance Decline Volume data (volume momentum index), and finally the third chart is Advance Decline Volume 10 Day MA Oscillator.

 

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goodtyneguy

Active member
146 9
Interesting observations ISAtrader, nothing more I can add to that.
 

isatrader

Senior member
2,951 129
Gold (GC) Stage Analysis

I've done a updated stage analysis of Gold (GC) as it's testing key levels again.

After a relatively brief Stage 4 breakdown in April, Gold held support from the larger Stage 3 range lows and broke out of a small Stage 4 consolidation and moved above the one year down trend line in August. It’s now forming a new Stage 1 range in the upper part of the larger one year Stage 3 range. But it is at a critical juncture as a move below the recent swing low and the 200 day MA at around 1660 will take it back into Stage 4A again imo, but within the larger Stage 3 range still.

Relative performance versus the S&P 500 has been improving a bit since the summer, but has been relatively flat over the course of the year. The 30 week weighted MA has been rising since August, and price has stayed mostly above it.

Weekly cumulative volume is close to giving a new sell signal and it wasn't able to make a new high during the summer move up, but it hasn't sold down yet and has been sideways for the last few months. But in order to see a break above 1800 and back into Stage 2, you'd need to see cumulative volume build to new highs and relative performance improve.

So I currently have it at a critical juncture in Stage 1, within a larger Stage 3 range. A move below 1660 is my Stage 4A breakdown point to watch for. And if it does breakdown again then the initial swing target would be 1546.9 which would take it back to retest the bottom of the larger Stage 3 range. Attached is my charts
 

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Rewardz

Junior member
31 2
Re: Gold (GC) Stage Analysis

MNST - Monster Beverage - STAGE 4 continuation shorting opportunity

Monster is in stage 4 as the 150 has been declining and huge volume selloffs

There has been a counter-trend rally back near the 150.

I went short today with stop above the 150 at the most recent pivot above the 150 (30 week) -- My buy-stop is $61.68day

Energy drink sector under fire due to deaths associated with energy drinks and pending legislation to ban or change the industry.

ISATRADER....where you suggest Stan places his protective BUY-STOP for this trade???? Just curious your feedback...Thanks.

Happy Trading.....And Remember Stan says to ALWAYS Trade with stops.
 

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isatrader

Senior member
2,951 129
The rule from the book for traders is that "Traders should never stay with a short position that moves above it's 30 week MA, even momentarily." So in the MNST case that would be a move above 59.89 - but a stop should also always be above a round number - so at 60.15 for example. However, you need to consider the prior peaks at 61.58 and 59.07; and the 200 day MA also, which is at 61.11, so your stop placement looks sensible from that perspective.

This looks to be a brave short though imo, as MNST has moved above it's 50 day MA - which you would normally place a trader stop above, and is close to it's prior peak. I can see it's hit some trendline resistance today, but it is still above its continuation breakdown level of 52 also. So my personal preference would have been to wait until it closed back below that level and the 50 day MA before going short as that would then have given you a more recent swing high to place your stop above. As although today's action looks good, it's still above it's one month trend line and short term moving averages and has outperformed the S&P 500 by almost 30% since it's October low.
 

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Rewardz

Junior member
31 2
Update on X - US Steel moving today into stage 2. Moves to multimonth high and clears the channel high of $23.78. Weekly close above that level is very bullish for the Steel stock. RS is rising outperforming the indexes.....

Happy Trading.
 

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isatrader

Senior member
2,951 129
Update on X - US Steel moving today into stage 2. Moves to multimonth high and clears the channel high of $23.78. Weekly close above that level is very bullish for the Steel stock. RS is rising outperforming the indexes.....

Happy Trading.
I'd agree with that. I've attached a slightly different chart which includes the separated effective volume of the small and large players, and the cumulative of the two. The cumulative effective volume (green line) is breaking out to new highs, and you can see from the separated volume that is almost exclusively coming from large players (red line), as the small players (blue line) have been sellers all year. So a strong case for a moving into Stage 2 as there is clear accumulation from the large players.

I've highlighted the swing target as well, which is 29.97 if it can get a weekly close above 23.78 today. Below is the weekly marked up chart.

 

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Rewardz

Junior member
31 2
I'd agree with that. I've attached a slightly different chart which includes the separated effective volume of the small and large players, and the cumulative of the two. The cumulative effective volume (green line) is breaking out to new highs, and you can see from the separated volume that is almost exclusively coming from large players (red line), as the small players (blue line) have been sellers all year. So a strong case for a moving into Stage 2 as there is clear accumulation from the large players.

I've highlighted the swing target as well, which is 29.97 if it can get a weekly close above 23.78 today. Below is the weekly marked up chart.

Thanks ISA=Trader.......I like that target you have in the $30 zone....you can see resistance on the chart and it allows for a smart exit. Stage 2 runs can really get going for long term big moves, but that is a very reasonalbe place to take profits or half off......Thanks for sharing & confirming. I like this page a lot to bounce ideas and empower one another to be great traders.....
 

goodtyneguy

Active member
146 9
Guys, US Steel - I don't want to be a party pooper but are you happy with the volume on the breakout and the modest close above the channel high?

Page 104 - I look for the following: either a one week volume spike that is at least twice the average volume of the past month (preferably it is even higher), or a volume build-up over the past three to four weeks that is at least twice the average volume of the past several weeks coupled with at least some increase on the breakout week.

It's also a close call for the 30 week moving average pointing up.

Cheers
 

isatrader

Senior member
2,951 129
Guys, US Steel - I don't want to be a party pooper but are you happy with the volume on the breakout and the modest close above the channel high?

Page 104 - I look for the following: either a one week volume spike that is at least twice the average volume of the past month (preferably it is even higher), or a volume build-up over the past three to four weeks that is at least twice the average volume of the past several weeks coupled with at least some increase on the breakout week.

It's also a close call for the 30 week moving average pointing up.

Cheers
It's an area we've talked about a fair bit over the thread and if you look at the ideal volume chart on p104, you'll see the volume build is on and following the breakout. This weeks volume was roughly double the previous 3 weeks volume and considering the market went lower all day, it displayed excellent relative strength to close the week above the breakout level.

The 30 week weighted moving average has been moving higher for the past 4 weeks. Often on a Stage 2A breakout the simple 30 week MA will only be flat, and Weinstein mentions this in the book, as it takes longer to react to recent price action than a weighted MA. As long as price is above the 30 week SMA and it is no longer falling - then it's acceptable to take the 2A breakout. You also don't have to take the exact horizontal breakout level; look at the examples in the book and you'll often see a sloping trendline joining the previous highs to get the breakout point. So on X if you draw a trendline across the August and the October high, then it broke out quite strongly this week.

Rewardz is playing the current US Stage 3/4 using a long/short strategy by the looks of things and so it's a relatively good long pick from that perspective imo. It's not an A+ pick, as they are rare, but as a short to medium term trade I'd put it as a C grade pick. As the volume call is tight as you've mentioned, there's significant near term resistance up to 32, the basic materials sector is in Stage 1 or 3 and the broad market is Stage 3/4. If it moves higher next week, but the volume recedes, then the book says to get out for quick profit. But ideally the volume should at least match this weeks and hopefully grow.

Remember Weinstein says in the book to use buy-stops to get in above the breakout levels - which would get you into a lot of false moves these days. The language has changed in GTA newsletters that I've read and he now says to buy a close above the level. So although it was very tight for US Steel, it did make the weekly close above the previous swing high and so is a fledgling Stage 2A. It could of course falter immediately next week and drop back into Stage 1, but the stop loss should be below the previous recent swing low, which was at 19.56. Or below a more minor swing low and the 50 day SMA for a trader, which would put it at about 20.75 imo - roughly just over 3 x ATR(200) risk, which would be acceptable for a trade. That is how I see this stock, as a trade only, as to become a investor Stage 2 pick it would need to clear the 32 level resistance. As realistically, anything up to there is just forming a much larger Stage 1 base.
 
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goodtyneguy

Active member
146 9
Thanks ISAtrader, I have n't had time to read through the thread so sorry if you are having to repeat yourself. You point out some finer points of the methodology as well as some refinements.

I was thinking that it is not an A+ pick but because I am new to the method I was not aware of how rare these are. I agree that does not mean that is not an acceptable trade though.

I was not aware of the change in the buying a close above the channel break as opposed to a print above. I suppose that makes sense because of the change in market conditions since the book was written. So, owing to this change in Weinstein's stance on the entry point we may see a gap up on Monday.
 

isatrader

Senior member
2,951 129
No worries about going over it again. It's good to keep it fresh in my mind and makes me check to be sure.

A+ picks are very rare, once a year maybe in the major stocks, unless you're looking across a very large stock universe, which most people don't have the time for; and volume is the most problematic area to read especially in large stocks like in the S&P 500 as they are all bought by various index funds etc. So that is why I added the cumulative volume to my own charts, to help me read when it's accumulating clearer, as volume is another area of the market that's changed a bit since the book was written. Although, if you trade in the small caps then the volume will much more like the book.
 
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