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Weinstein Is Not Enough!

Perhaps it might have been fairer if this was titled “Stage Analysis is not Enough” as Weinstein does spend time to consider stops settings etc. But, for share buying to be successful, whether for trading or portfolio composition, it is not enough.

Having said that, let me confirm that Weinstein’s ‘Stage Analysis’ is the fundamentally important analysis on which all share purchases are made in our company. But it is the additional three ‘add-on’ analysis areas that dictate whether a share purchase is likely to be successful and whether or not profits will be made and retained over time.

These three additional analysis techniques are –

1. ‘Breakout’ Analysis
   
2. Prudent Money Management
   
3. Strict Stop-loss and Profit-protection control
   

‘Breakout’ analysis consists of careful identification of active support and resistance levels for each share being considered. Shares price will react to support and resistance levels based on either, and most commonly, the “8ths” rhythmic scale (12.5%, 25%. 50%, 75% etc.) or the “3rds” rhythmic scale (16.66%, 33.33%, 50%, 66.66% etc.). These are powerful levels and it is important to only buy (or sell) a share when such levels are being tested and the price has managed to breakout (or breakdown).

Prudent Money Management means risking only a small percentage of your capital on each separate trade and never exceeding it (no matter how good you think the trade). Take the (likely) entry price and deduct from it the stop-loss price which you adjust to create a loss figure that you are willing to bear. At ShareHunter we stick firmly to a limit of just 1.5% of the capital base as the maximum that we are willing to lose on any trade.

Strict Stop-Loss and Profit-Protection is fundamental to successful share trading whether short term of medium/long term. My experience over many years is that to build profits you should almost forget about the winning trade(s) and just concentrate on the new trades whilst the stop is below your entry price. Put the stop price into the market so the decision, and exit, is made for you if it is hit.
That way you will make money from trading shares.

These three ‘musts’ have stood the test of time and have, for example, allowed ShareHunter to run a model £20,000 client spread betting/CFD account up to over £150,000 in just 4 years – exclusive of costs but, even allowing 30% of profits to disappear in charges you can appreciate how valuable has been Weinstein’s Stage Analysis + the three ‘add-ons’.

Alan Saunders
Chief Analyst, ShareHunter.com
August 2013

(2013-09-10, 01:38 AM)goodtyneguy Wrote: Great examples of the profitability of the method once in the right stocks. So the message seems to me to be don't be too concerned about the lack of volume in the base immediately preceding the break out or on the break out. Rather look for the mansfield RS to cross the zero line, enter on a break out and if big volume does not come in, in say one, two, or three weeks later then exit and look for another opportunity?

(2013-09-13, 08:57 PM)gbarbs Wrote: With the bullish percent index flashing a warning are you taking a more cautious approach? Am I on track with that Bullish %? I got that far in Dorsey's book so I think it warrants caution with buys.

• Aggressive Defense
  
• Decrease volatility
  
• Raise cash levels
  
• Reduce exposure to offensive sectors
  
• Tighter stops on longs
  
• Sell leaders & laggards on breakdowns
  
• Buy protective puts to hedge
  
• Buy inverse funds to hedge
  
• Initiate Short Equity exposure
  
• Increase non-correlated exposure