[isatrader]

Hi,
I was wondering if TMQ this is  a great buying opportunity or a warning sign? It is down on double avg weekly volume but looks to just be pulling back closer to the  30 ema.

Thanks  for your thoughts,
Brian

For me, when I'm in a stock and it has price action like that. I would get out, and then reassess from the sidelines. As you can always get back in again if it sets ups again. I always go by the, if in doubt, get out theory.

[briansmith456]

Hello,

I was wondering if perhaps this chart says crude  oil (WTIC) is a buy if it breaks 62.50? Perhaps a break above will start to see WTIC price outperform SPX price. In the same token I am thinking XLE is a buy if it breaks the trendline as the 30 ema, 30 sma and 10 sma should start curling up if it breaks above the trendline.

Thanks for any thoughts on crude (and  XLE).

Brian

[isatrader]

I was wondering if perhaps this chart says crude  oil (WTIC) is a buy if it breaks 62.50? Perhaps a break above will start to see WTIC price outperform SPX price. In the same token I am thinking XLE is a buy if it breaks the trendline as the 30 ema, 30 sma and 10 sma should start curling up if it breaks above the trendline.

The main issue with oil with regards to the method currently is that it has the weakest Relative Performance versus the market. If you read page 75 in the book (The Forest to the Trees approach) you'll see that this is the opposite of what we want to see.

I've marked up the weekly charts of both, but they each show a well defined Stage 1 range currently, and very poor Relative Performance versus the market. One of the key things to look for before a move into Stage 2 imo, is for the relative performance to be either at least in inline with the market for a few months or outperforming the market and above its zero line.

From my own research of thousands of charts over the years, the "zero line" itself (52 week simple MA of the relative performance versus the S&P 500) should be at least flattening when a stock moves into Stage 2A, but ideally starting to rise. And the relative performance line should be above it.

There are lots of big moves when a stock/index is bottoming and trying to form a Stage 1 base, and it can be tempting to try and trade in it. But, the risks are much higher than trading only Stage 2, as there's still a lot of prior supply to deal with. So my advice is to limit your risk as much as possible and try not to bottom fish in Stage 1, as its not what Stage Analysis is about.

I recommend that you read the Stage Analysis Study Guide - Questions and Answers thread, and work through the examples, as it will help you to understand the differences in quality and what to look out for.

Below is the marked up weekly charts.

       

[briansmith456]

I was wondering if perhaps this chart says crude  oil (WTIC) is a buy if it breaks 62.50? Perhaps a break above will start to see WTIC price outperform SPX price. In the same token I am thinking XLE is a buy if it breaks the trendline as the 30 ema, 30 sma and 10 sma should start curling up if it breaks above the trendline.

The main issue with oil with regards to the method currently is that it has the weakest Relative Performance versus the market. If you read page 75 in the book (The Forest to the Trees approach) you'll see that this is the opposite of what we want to see.

I've marked up the weekly charts of both, but they each show a well defined Stage 1 range currently, and very poor Relative Performance versus the market. One of the key things to look for before a move into Stage 2 imo, is for the relative performance to be either at least in inline with the market for a few months or outperforming the market and above its zero line.

From my own research of thousands of charts over the years, the "zero line" itself (52 week simple MA of the relative performance versus the S&P 500) should be at least flattening when a stock moves into Stage 2A, but ideally starting to rise. And the relative performance line should be above it.

There are lots of big moves when a stock/index is bottoming and trying to form a Stage 1 base, and it can be tempting to try and trade in it. But, the risks are much higher than trading only Stage 2, as there's still a lot of prior supply to deal with. So my advice is to limit your risk as much as possible and try not to bottom fish in Stage 1, as its not what Stage Analysis is about.

I recommend that you read the Stage Analysis Study Guide - Questions and Answers thread, and work through the examples, as it will help you to understand the differences in quality and what to look out for.

Thanks, Isa for the charts and explanation.

I was not aware of it being high risk even if the price breaks above a down sloping price line so thanks for pointing that out. So one would look to oil and XLE if price were to ever be above at least a flat price line (I notice in 2017 of Oct. price broke above a flattish price line and oil went much higher).
Brian

[briansmith456]

PEO.V has had a nice base and is now looking to break out over 8.52. Everything looks good but I take it one should never buy a breakout unless volume comes in?  Last few weeks there was no volume. So like with KL I would need to see that the daily volume is well above 200 sma to enter? I am assuming when stocks break out on pitiful volume there is little prospect of them going very far and are more likely to break back down soon after... It would be a shame if it breaks out on little volume as everything else- to my eye- seems really good in terms of setting up.

Thanks.

[isatrader]

PEO.V has had a nice base and is now looking to break out over 8.52. Everything looks good but I take it one should never buy a breakout unless volume comes in?  Last few weeks there was no volume. So like with KL I would need to see that the daily volume is well above 200 sma to enter? I am assuming when stocks break out on pitiful volume there is little prospect of them going very far and are more likely to break back down soon after... It would be a shame if it breaks out on little volume as everything else- to my eye- seems really good in terms of setting up.

Thanks.

It not that you should never buy, unless volume comes in on the breakout day and after. But that you should be more cautious if you buy without good volume, as you want to see at least 2 x the average volume come in on the breakout day, or ideally more. And then finish the weekly chart with at least 2x the average weekly volume too. As you want to see strong demand coming into the stock, and ideally the other stocks in the same sector too. As the biggest moves tend happen in stocks where the whole sector is getting volume.

Is PEO.V in a strong or strengthening sector? Are its competitors breaking out too? Is there lots of volume coming into the other stocks in the sector etc.

Stage Analysis is not just about looking for good individual charts, it's about taking a Weight of Evidence approach view to the market, and timing your entries into Stage 2 stocks in sectors where the institutional money is flowing into. As without the volume, the moves tend to much more mediocre. So volume is one key components of the method for this reason.

[briansmith456]

Hi,

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.

It is still too early to enter given the price line seems to be trending down still and price has yet to break above it (may do so soon). Volume is really good. The 30 ema, 30 sma, 10 sma are still sloping down. It is tempting to rush in and buy as it  looks like it will continue to run based on how strong silver seems to be (is silver  in stage 2 break out mode or must it break 16.20-16.30 to be considered in proper stage  2 buying stage?). I know that FSM must be in the early stages so best to stay away for now. Would it take a break of 4.03 to be an entry? I am assuming it would be the proper entry stage  by then. 

Another question is based on your experience, where could this still pull back to if it does not break above 4.03 given that it is in a very early stage still.

Thanks.
Brian

[isatrader]

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 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.