INVESTMENT STRATEGIES - Weinstein's Stage Analysis Strategy.

Weinstein's Stage Analysis Strategy.

Source: Stan Weinstein’s secrets for Profit in Bull and Bear Markets
Stage Analysis:

Stage One - base formation where price fluctuates in a narrow range, moving back and
forth over the 200-day Moving Average (or 150-day MA).

Stage Two - advancing phase where price advances over the 50-day and 200-day MA.

Stage Three - top area where the price peaks. It may drop below the 200-day MA which
begins to slope downwards. This is a Sell signal.

Stage Four - declining phase where the price drops below the 50-day and 200-day MA. It
continues to decline until a new Stage One starts.


Stock Selection and Entry:

1. Positive Market trend.

2. Bullish sector. Sector analysis is the same as Stock analysis.

3. Select best Chart Patterns in the sector. With shares in a Trading Range record the
Price at which breakout should occur.

4. Identify where the next area of Resistance is. It is best if there is no overhead
resistance. Resistance, which is 1.5 to 2 years old, is not very potent.

5. When share first breaks out of Stage One or after a pullback to the breakout point,
which is safer.

6. Volume should be up on the breakout and down on the pullback.

7. Buy half on the breakout and half on the pullback.

8. Do not buy on a breakout if the price line is below the 200-day MA.

9. Relative Strength (Price/Price of Market Average) should be positive.

10. Look for useful patterns. Head and Shoulders Bottom is bullish if it breaks out
above the Neckline. Double Bottom is more common.

11. Look for Triple Confirmation Pattern: i) price above 200-day MA ii) RS positive
at breakout iii) big price move up to 40-50% before the breakout.

12. Do not buy when:
• market bearish
• negative sector
• price below 200-day MA
• declining 200-day MA
• too late in Stage Two advance
• poor volume on breakout
• poor Relative Strength
• heavy recent overhead Resistance
• below a breakout.
Exit:
• Set Stop just below the floor of Support. Raise the stop to the 200-day MA as the
price advances.
• The objective is 20% within two months. Sell.

Bear and Bull Market Indicators:

• Stage Analysis. A break below the 200-day MA is a strong Stage Four Sell signal.

• Advance/Decline Line. A/D Line and the Index going up is a positive. If both
break down from a top formation, a new bear market is about to occur. Prior to
this, there should be a widening gap between the two lines, as the A/D Line loses
momentum. On a bottom, the Index line will stop and the A/D Line will continue
down. This indicates the start of a bull market.

• New Highs/New Lows Indicator. Divergence between the two gives an early
warning of a reversal. Use only with other indicators.

• General Motors. If GM does not make a new high or a new low within 4 months,
the trend is reversing. Compare with GM Stage Analysis - if contradictory, go
with the Stage Analysis.
• Price/Dividend Ratio = Index / (Index*Yield in decimal form). 14-17 is over-sold
and 26-30 is over-bought. Use only with other indicators.