[Tryst]

The key points that I learnt in 2013 about Stan Weinstein's method.

Volume is just as important today as it was back when Weinstein wrote the book. We had discussed on the old thread and earlier in the year whether volume was as important anymore due to indexing, ETFs and dark pools etc. But through the course of doing this site and the daily scans for breakouts and breakdowns etc I've come to realise that it's just as important today as it was back then, it's just only visible mostly the small caps that aren't distorted by the indexing etc.

The vast majority of Stage 2A breakouts occur when the relative performance is above the zero line or on the week it crosses it. However, if the four key components of the method aren't all present - i.e. price action breakout, 2x volume, relative performance above zero line, above or moving above long term resistance - then avoid.

The Relative Performance Zero Line (52 week moving average of the stock divided by the S&P 500) is a useful guide as to whether a Stage 2A breakout will be successful or not. The Mansfield RS flattened the zero line, but by viewing the unflattened MA you can get additional vital information as to whether it's too early for a stock to breakout or not successfully. As I've noticed through the hundreds of charts I look at daily that if the zero line is still declining sharply when the Stage 2A breakout occurs, that the stock will struggle to advance. It doesn't mean that it won't advance, but that the most successful Stage 2A breakouts occur when the zero line is either flattening or already moving higher.

Never to buy a breakout trading under heavy / any near term resistance. I define this using the weekly Ichimoku Cloud as I can instantly see the resistance then when scanning through the charts each day and filter out any setups that aren't ready and will need more time to work through the resistance first. Any that aren't ready can be put on a longer term watchlist that can be reviewed occasionally for if and when they are ready to clear resistance.

A+ setups occur regularly in the small/mid caps but are rare in the large cap stocks. So you should never compromise in the small and mid cap stocks - remember the excerpt about opportunity cost from the book.

Moving on to 2014 - the last year in the market was very strong by historical standards and a lot of traders will be patting themselves on the back for doing so well as so many stocks went up, and so it's easy to get complacent. But we never know whats going to happen next in the market, and with the US markets continuing in Stage 2B currently we need to continue to focus, especially on the quality of trades we now make, and also on the stocks already in our portfolios, as they are the best guide to whats really happening in the market imo, along with the market breadth data.

Good luck with your trading and investing in 2014, and please try to get involved with the Stage Analysis site if you use Stan Weinstein's method even if only in a small way.

Happy New Year

Great post, isatrader, and I agree re. volume.

One thing that has been odd is that the volume in the S&P futures as its been pushing to new highs has been below average for most of the year and most volume that is above average is volume that occurs on a down day.

[liquidminded]

Hi,

I totally agree with your points below, especially regarding the small caps. I've noticed they have much more upside than the larger caps in their respective sub-industries. I use the large caps as a gauge basically. Usually it seems the larger caps start to breakout first as they are more attractive to the institutions, and then get ready for the small caps, as they are next, and will breakout with greater force (smaller floats help too)!

I'm glad you agree with the 52wk MA of RS as being a bit better than the conventional Mansfield "straight" line. I agree with your observations here too.

One thing I am trying to get better at is judging near term resistance. You stated you have been using the Ichimoku clouds. I've never paid that much attention to them as they seemed complicated, but I decided to start looking into them after I read your thread a couple of days ago. Do you use a weekly time scale with the Ichimoku, or daily, or both?

I have been looking at my recent big winners (AKS, TNK, AMRS for example), they broke out through the cloud while the leading span A was still below the leading span B line (on a weekly chart though). RS, volume met the requirements. The daily chart showed the A-line crossing back and forth with the B-line.. I am also seeing that the heavier or thicker the cloud is above the current price, and the farther it is above the current price, then you should avoid it due to loads of near term resistance. What's your stance and interpretation of the cloud? Am I seeing this right?

Thanks,

Dan

The key points that I learnt in 2013 about Stan Weinstein's method.

Volume is just as important today as it was back when Weinstein wrote the book. We had discussed on the old thread and earlier in the year whether volume was as important anymore due to indexing, ETFs and dark pools etc. But through the course of doing this site and the daily scans for breakouts and breakdowns etc I've come to realise that it's just as important today as it was back then, it's just only visible mostly the small caps that aren't distorted by the indexing etc.

The vast majority of Stage 2A breakouts occur when the relative performance is above the zero line or on the week it crosses it. However, if the four key components of the method aren't all present - i.e. price action breakout, 2x volume, relative performance above zero line, above or moving above long term resistance - then avoid.

The Relative Performance Zero Line (52 week moving average of the stock divided by the S&P 500) is a useful guide as to whether a Stage 2A breakout will be successful or not. The Mansfield RS flattened the zero line, but by viewing the unflattened MA you can get additional vital information as to whether it's too early for a stock to breakout or not successfully. As I've noticed through the hundreds of charts I look at daily that if the zero line is still declining sharply when the Stage 2A breakout occurs, that the stock will struggle to advance. It doesn't mean that it won't advance, but that the most successful Stage 2A breakouts occur when the zero line is either flattening or already moving higher.

Never to buy a breakout trading under heavy / any near term resistance. I define this using the weekly Ichimoku Cloud as I can instantly see the resistance then when scanning through the charts each day and filter out any setups that aren't ready and will need more time to work through the resistance first. Any that aren't ready can be put on a longer term watchlist that can be reviewed occasionally for if and when they are ready to clear resistance.

A+ setups occur regularly in the small/mid caps but are rare in the large cap stocks. So you should never compromise in the small and mid cap stocks - remember the excerpt about opportunity cost from the book.

Moving on to 2014 - the last year in the market was very strong by historical standards and a lot of traders will be patting themselves on the back for doing so well as so many stocks went up, and so it's easy to get complacent. But we never know whats going to happen next in the market, and with the US markets continuing in Stage 2B currently we need to continue to focus, especially on the quality of trades we now make, and also on the stocks already in our portfolios, as they are the best guide to whats really happening in the market imo, along with the market breadth data.

Good luck with your trading and investing in 2014, and please try to get involved with the Stage Analysis site if you use Stan Weinstein's method even if only in a small way.

Happy New Year

[isatrader]

One thing I am trying to get better at is judging near term resistance. You stated you have been using the Ichimoku clouds. I've never paid that much attention to them as they seemed complicated, but I decided to start looking into them after I read your thread a couple of days ago. Do you use a weekly time scale with the Ichimoku, or daily, or both?

I have been looking at my recent big winners (AKS, TNK, AMRS for example), they broke out through the cloud while the leading span A was still below the leading span B line (on a weekly chart though). RS, volume met the requirements. The daily chart showed the A-line crossing back and forth with the B-line.. I am also seeing that the heavier or thicker the cloud is above the current price, and the farther it is above the current price, then you should avoid it due to loads of near term resistance. What's your stance and interpretation of the cloud? Am I seeing this right?

Hi Dan, welcome to the site and thanks for posting for the first time.

With regards to using the Ichimoku cloud to gauge resistance, I only look at the weekly cloud for this, as weekly is the time frame that the Stage of the stock is determined from. I'm using the cloud in it's most basic form, and turning off all of the other bits as I'm simply using it as a visual guide to where there is potential resistance.

In terms of reading the cloud, you seem to have the right idea imo, as the thicker it is, the stronger resistance it is for a stock to work through, but it doesn't mean that the stock won't go through it, it's just a potential area of resistance. So I don't think you should get caught up in all the intricacies of Ichmoku, as it's a complex system. I'd suggest just looking at the weekly cloud, it thickness and it's relationship with the price as it's a useful visual filter when scanning through the weekly charts and can help you avoid getting into stocks too early.

Personally I'm mainly looking for stocks that have already cleared the top of the weekly cloud when they break out into Stage 2, but I did highlight all three of the stocks you mentioned when they moved into Stage 2A in the watchlist thread and noted the resistance as they become better candidates once they clear the cloud imo, which they all did. Here's their current charts.

           

[MalcolmSm1th]

I have been looking through the FTSE-350 sectors yesterday and this morning and quite a few have taken my interest.

This is something that I have entered this morning, arguably a couple of days late, in the Chemicals sector - SYMTHOMER (SYNT.L). Ideally I ought to have got in a few days ago but I think that otherwise it's a suitable selection and if it costs me a few percent then so be it.


Apologies for the cramped display from ShareScope, I will try to do better.

The eector is going up, the price has just got over the previous high, it's broken the resistance level and generally looks good.

Now there is one other plus matter which may not be of interest to the pure technical players and that there is, in the bottom window, a '1' in the Naked Trader column. This is something that I've knocked up to tell me that this stock passes Robbie Burns' basic fundamental filters. So even if this wasn't a Weistein play, which I do think it is, then it would also satisfy my basic filters for a Fundamental play.

When the effects of this bottle of lunchtime wine wears off I will be looking for more.

- Malc

[isatrader]

This is something that I have entered this morning, arguably a couple of days late, in the Chemicals sector - SYMTHOMER (SYNT.L). Ideally I ought to have got in a few days ago but I think that otherwise it's a suitable selection and if it costs me a few percent then so be it.


Apologies for the cramped display from ShareScope, I will try to do better.

The sector is going up, the price has just got over the previous high, it's broken the resistance level and generally looks good.

Hi Malc, I'll just give you a quick Stage Analysis on it, as I don't want to unduly influence you on an open position. It's been in Stage 2 for the last year, but had a very rough ride before making a continuation move in late August / early September, and didn't get far before consolidating again under the all time highs from which it's not managed to breakout from yet, but had an failed attempt on Friday. Volume is below average and has been falling for most of the last year, which isn't necessarily a bad thing as with Weinstein's method we are interested in the volume on the breakout week and the following weeks, but UK stocks have volume issues which we've discussed elsewhere on the site, and so it isn't as pertinent. But, if it does breakout and close at new highs this week then you want to see at least two times the average weekly volume to give some confirmation that it's got the interest / strength to move higher. The relative performance zero line is flat and hence it's traded roughly inline with the broad market over the last year, but currently it's above it's zero line and so is outperforming in the short term. Attached is the weekly chart.

   

On another note, I've created a new thread for the UK traders and investors on the site called UK Stocks - Watchlist and Discussion, so that there's a place for UK traders to discuss UK stocks, as this main thread is mostly for general discussion and the weekly updates of the major charts. So go to the UK Stocks - Watchlist and Discussion thread in the Stage Analysis forum to post your UK charts from now on.

Cheers

[MalcolmSm1th]

Thanks for the feedback. I think that I am just not looking far back enough to get a good idea of the stages.

I will head over to the new section.

- Malc

[isatrader]

Thanks for the feedback. I think that I am just not looking far back enough to get a good idea of the stages.

If you are investing then you need to get to grips with using weekly charts as your main timescale.

[isatrader]

Attached is the exclusive S&P 500 Cumulative P&F Breakouts - Breakdowns charts.

There was 22 breakouts and 14 breakdowns this week in the S&P 500.