Stan Weinstein’s 4-stages cycle approach

#1 - Invest with the trend

#2 - From the forest to the tree!

#3 - Invest on the breakout!

  • breakout must be of importance

  • the price must also break over the 200 day moving average and the average line must head in the direction of the trend

  • the breakout must be accompanied by a significant pike in volume!

#4 - Not all winners are winners!

  • Don’t put all your eggs in the same basket! But, don’t over diversify neither. Split your money equally on 5 to 10 stocks

#5 - Invest with a protection net!

  • When investing or doing almost anything in life, there’s always a simple rule to follow. It is called the cost/benefits rule!

The base of Stan’s techniques is to invest with the trend, surf the wave to the peak but, if the promised wave doesn’t show up, you must have an escape plan.

From Secrets for profiting in bull and bear markets by Stan Weinstein

Stage 1: Basing area.

After several months decline, start sideways trend. Volume lessens (often

starts expanding towards end stage 1). 30 week MA begins to flatten out.

Stage 2: Advancing phase.

Ideal time to go long when stock swinging out of its base into this more dynamic stage. Breakout above resistance zone and 30-week MA should occur on impressive volume. Usually after initial rally at least one pullback (the less the pullback the stronger the stock).

30 week MA usually starts moving up shortly after breakout. Expect price to move two steps

forward and one sharp step back – ok as long as above 30 week MA.

When angle of ascent of MA slows down considerably and prices closer and closer to MA,

stock becomes a hold.

Stage 3: Top area.

Upward advance loses momentum and stock starts trending sideways.

Volume usually heavy and moves sharp and choppy. Prices tiptoes below and above MA on

declines and rallies. Keep emotions in check.

Stage 4: Declining phase.

Stock breaks below bottom of support zone.

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