[briansmith456]

All my friends were buying FSM (silver miner) in the 2.50-3 range and I kept telling them I did not want to take the risk as it was not a proper setup based on the Weinstein method. They are all laughing at me now as they are up huge.

Well, good for them, but if they aren't following a defined methodology with an edge, then it's just gambling. I don't know them, so they may be following proper rules of a different method, as there's many ways to trade. But be very careful not to fall into gambling. As it's easy to do. 

Trading is not about what other people are doing. All that matters is that you are making consistent gains, and minimising your losses, but using proper risk management and trading high quality setups.

In the $2.50-$3 range it was still in Stage 4. So, a big no no in terms of the methods rules, as you don't ever buy a stock in Stage 4 if you are trading with Stage Analysis. It's now just entering Stage 1 from its rally this week, which with a laggard like this, may be due to short covering, or may just be getting pulled up with the move in the Silver sector as a whole. Either way, if you are following the methods rules, it's currently breaks a lot of them, which is why I didn't highlight in the watchlist with the other silver stocks. That doesn't mean it can't move 100%+ or more from here possibly, as "a rising tide lifts all boats". It's just that following Weinstein's rules means that we look should be looking for higher quality setups in the silver sector that are just moving into or are in Stage 2 already, with strong relative performance above their zero line, strong volume on and following the Stage 2 breakout or continuation, and little or no recent overhead resistance. So look for silver stocks like with those qualities if you are using Stage Analysis.

See pages 129 and page 338 in the book for Stans Don't Commandments etc, as gives a good list of some key rules to keep in mind.

Thanks for the quick response Isa. I appreciate it.
I will look more towards the silver miners on your watch list that you posted to see which are not too extended.

Brian

[Mactheriverrat]

@isatrader

Do you find better return with continuation breakouts or the initial breakouts?

[isatrader]

Do you find better return with continuation breakouts or the initial breakouts?

For me personally, I prefer to trade Stage 2 continuation breakouts, as although the opportunities for a large percentage move seems greater at the Stage 2A entry point, you have to factor in the time component also (opportunity costs), as compounding smaller returns can be more profitable than single large moves that you have to hold for up to a year or more. As an early Stage 2A breakout can take many months, and because it's early in the trend change, there's a high percentage chance of it pulling all the way back the breakout level and even below it. Which is shown in the investor method diagram from the book as the B entry point. I've found that this early part of Stage 2, which is know as the Stage 2A sub-stage, can take up to 6 months in a lot of stocks, before it finally works through all of its prior resistance and is ready to move higher in the Stage 2 advancing stage.

So the first Stage 2 continuation breakout is the first point at which I'm normally interested in a stock, as by this point the key moving averages are all trending higher, and the stock has worked off prior resistance. You can also assess the volume coming in since the initial Stage 2A breakout, and whether it contracted appropriately on the pullbacks as it's moved higher, and see if the relative performance versus the S&P 500 is strong and above a rising zero line.

So in my opinion, trading the early Stage 2 continuation breakouts is lower risk, as you are focusing only the higher quality setups already in Stage 2, and you can manage your entry better as the volatility contracts.

[Mactheriverrat]

@isatrader

Thank you.

[diaz]

Hi Isa,
Can I get your analysis on MDR? I thought the stock was poised for an increase but it tanked today (on earnings). I thought it looked like a breakout was coming based on increased volume on the week of July 8th.

[Mactheriverrat]

Hi Isa,
Can I get your analysis on MDR? I thought the stock was poised for an increase but it tanked today (on earnings). I thought it looked like a breakout was coming based on increased volume on the week of July 8th.

IMHO- If your talking about Mcdermott international I would say stage 4 and if your in to shorting stocks then you get the idea. Like Weinstein's says " The tape tells all". To me its what you see not what you want to see. Also it may be in week 1 of stage 4 and it can keep falling in a stage 4. 

MDR - Mcdermott

[briansmith456]

Hi,

I was hoping you could comment on KL in terms of what you would watch for now in terms of an entry. It is pulling back close to its 10 sma  on the weekly. It will be interesting to see if it reaches its 10 sma and if it  does whether  it holds. Most are assuming FOMC news will cause miners and gold/silver to run higher so maybe it does not even reach the 10 sma. 


So many miners are 50+% from the weekly 10 sma I would hope they pull back but if most folks are correct in assuming FOMC news will cause miners to rocket higher I guess they will just become more extended.

Thanks,
Brian

[isatrader]

I was hoping you could comment on KL in terms of what you would watch for now in terms of an entry. It is pulling back close to its 10 sma  on the weekly. It will be interesting to see if it reaches its 10 sma and if it  does whether  it holds. Most are assuming FOMC news will cause miners and gold/silver to run higher so maybe it does not even reach the 10 sma. 

As you know from my journal thread, KL is one of my open positions currently. Todays sell off on large volume is not ideal, as in the method we want pullbacks to be on lower volume, not higher. So it is giving me pause about the position, unless it can recover quickly and strongly before the end of the week.

In the method we don't trade on what we think will happen with regards to news etc, but instead look for signs of what's actually happening in the price action and volume etc, and the broad market and sector too. So people might be assuming that the news will cause miners and gold/silver to run higher. But always manage your risk first, as the market is never wrong. And even strong sectors can have pullbacks and consolidations that can last for multiple months.