A thread on how to identify stage-2 stocks, & why is it important to take any stock off your watchlist that is not in stage 2.
Please read on. Market veterans, please ignore.
Please read on. Market veterans, please ignore.
Stan Weinstein, in his book “Secrets For Profiting in Bull & Bear Markets” outlined the principle of 4 stages that every stock goes through:
Stage 1 - basing: Consolidation
Stage 2 - advancing: Accumulation
Stage 3 - topping: Distribution
Stage 4 - declining: Capitulation
Stage 1 - basing: Consolidation
Stage 2 - advancing: Accumulation
Stage 3 - topping: Distribution
Stage 4 - declining: Capitulation
As the stock advances from stage-1 to stage-2, price breaks out above its 30-week moving average (MA) on impressive volumes. The 30-week MA starts turning up shortly after the breakout, & the price stays above the 30-week MA.
In his book “Trade Like a Stock Market Wizard”, @markminervini further improved this by adding that the 10-week MA should be above the 30-week & 40-week moving averages, & the 40-week MA should be rising for at least a month.
On my weekly charts, I just display the 10-week & 30-week moving averages, & prefer the 30-week MA also to be rising for at least a month. Obviously, the 40-week MA should also be in its place.
The ideal scenario is to buy stocks when they are coming out of the first stage into the second stage & beginning to move higher. The majority of gains that a stock will make is while it is in a stage-2 uptrend.
When your stock is in any stage other than stage-2, you are either losing money or losing time. So, before you initiate a position in any stock, make sure that your stock be in stage-2. Keep this non-negotiable, & with proper risk management, you'll be successful.
Fin.
Fin.
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