Weinstein 'Waves'

[canny]

I'm just learning about these. "Weinstein waves /charts / stages
Do we have any 'experts' on the forum?

OPC is a classic second stage weinstein wave - ready to break out IMO.
Thoughts please, and other cases that you may identify as good prospects?

Early info - Stages 1 & 2
Phase One – Accumulation / Basing

During the accumulation or basing phase, shares of a stock are transferred from weak hands to strong hands. This phase usually happens after a long decline or a lengthy advance. The stock trades in a very narrow range and appears to be dead money to the average investor.

They are correct to a certain degree, because - during this phase - the forces of supply and demand are roughly equal. Although there is no big buying excitement, there are no waves of sellers either. During this time, the average investor often sells out of fear that the stock will drop further or he/she sells because of impatience.

The stock market discounts the future. The market does not move based on today’s news, but on perceptions on what the future of the economy and business prospects will be. This is true with individual stocks also. The smart money, insiders and institutions, are the first to realize that a company’s prospects are brightening. Towards the end of the basing phase they begin to heavily accumulate the company’s stock. Often, although not always, the stock’s trading volume will pick up towards the end of this phase and large 'big block' purchases will take place.

A trading range defines the price action in a base. Stocks that are basing bounce between a specific high and low price zone. Sellers often wait for the stock to go to the top of its range before they sell. By doing this they create an area of resistance, a price level the stock cannot trade through. When it reaches resistance it repeatedly falls back down. The more often it does this, the stronger the resistance. The basing phase lasts as long as resistance holds and the stock remains stuck in its trading range. As a general rule the longer this phase lasts the longer the second phase will last.

Phase Two – Mark Up / Rising Prices

If the smart money continues to accumulate shares they will eventually run out of sellers to buy from. At this point, resistance gets taken out and the stock price clears its base. Bulls get the upper hand with the stock, not because there are suddenly more buyers interested in the stock, but because the sellers have disappeared.

Often - at the moment the stock breaks out of its basing phase - the fundamentals of a company are poor. However, even though this is the best time to buy a stock most analysts will be down on the stock and consequently your stockbroker will probably try to talk you out of buying.

But remember, the smart money buyers and stock prices themselves, are anticipating a positive future. You are always better off following their lead than the opinions of Wall Street analysts and most stockbrokers.

As demand outpaces supply, institutions and insiders will compete with one another to buy the stock. Their psychology begins to change. During the basing phase they bought on dips, now they do not mind buying as the stock price advances.

As the advance continues, eventually word gets out that the fundamentals of the company are improving or some positive development concerning the company becomes common knowledge. As this happens, the average investor and the general public becomes interested in the stock and begin to buy too. Analysts begin to put the stock on their recommendation lists.

 

[Julia]

I'm in the middle of Weinstein's "Secrets for Profiting in Bull and Bear Markets" and finding it excellent. Many thanks to Bunyip for the recommendation.

Weinstein presents his ideas in a very straightforward and easy to understand way.

If Bunyip happens to be reading this thread, he may comment further.

Julia

 

[canny]

Thanks Julia - same reading as me!!
Have you found any other good examples yet? OPC definitely worth a long look.

 

[Dutchy3]

His material is the finest and best I've every read.

A few pages out of the earlier Bedford material also clarified a number of points for me.

Now ... if anyone can teach me how to be patient I'd be living up to the potential of those greats that have been willing to share their knowledge.

 

[RichKid]

I'm just learning about these. "Weinstein waves /charts / stages
Do we have any 'experts' on the forum?.......

Hi Canny,
I think Nick Radge follows that type of thinking, you might have to check with him, I think I've heard him mention it before as a book he recommends, but don't quote me on that, see this thread. Also sounds a bit similar to EW theory about the different stages of a cycle and crowd behaviour within it.

That's a great extract/summary btw canny, thanks! I've been meaning to read it properly for awhile now.

 

[Julia]

Hi Canny,
I think Nick Radge follows that type of thinking, you might have to check with him, I think I've heard him mention it before as a book he recommends, but don't quote me on that, see this thread. Also sounds a bit similar to EW theory about the different stages of a cycle and crowd behaviour within it.

That's a great extract/summary btw canny, thanks! I've been meaning to read it properly for awhile now.

Rich,

I've found Weinstein's book far easier to read and understand than Nick's "Adaptive Analysis" where all the details about Elliott Waves etc just found my eyes glazing over (with all due respect to Nick, of course).

Weinstein starts off with the given that the reader knows nothing about TA and gradually presents what he considers the essentials in step by step form, with each chapter being followed by a "quiz" from which the reader can determine whether or not they have a good understanding of the material already covered before going on to the next concept.

Reading this book, even just to halfway through, has already changed the way I look at my portfolio.

Julia

 

[RichKid]

Rich,

I've found Weinstein's book far easier to read and understand than Nick's "Adaptive Analysis" where all the details about Elliott Waves etc just found my eyes glazing over (with all due respect to Nick, of course).

Weinstein starts off with the given that the reader knows nothing about TA and gradually presents what he considers the essentials in step by step form, with each chapter being followed by a "quiz" from which the reader can determine whether or not they have a good understanding of the material already covered before going on to the next concept.

Reading this book, even just to halfway through, has already changed the way I look at my portfolio.

Julia

Hi Julia

Yes, Nick's book is a bit concise so it can be heavy going (I read some paras several times- still re-reading) but I find his volume commentary seems to tie up pretty well with the Weinstein stuff, there are others who mention it, some traders just follow a particular fund (eg 452 Capital or Perpetual) as a 'method' based on the same premises. My take is that they are describing the same broad behaviour but in different ways and they trade it differently too; the simpler the better so I'll definitely be reading it as well. The quiz format sounds useful.

EW does sound quite complicated when you go through the detail, I just try to stick to the basics as recommended by Nick (besides I couldn't fathom the more esoteric aspects). The other thing with Nick's book is that if I hadn't been familiar with some of the issues it wouldn't have made as much sense, also learning more as I trade and make mistakes- the application is what hones the learning process.

 

[bunyip]

Stan Weinstein is without equal in his ability to present a simple, commonsense trading methodology that works.
If there's a better trading book than Stan's 'Secrets For Profiting In Bull And Bear Market's, then I certainly haven't found it among the 50 odd trading books I've read.
There's no waffling on with this bloke, no talking around in circles and no padding his book with such useless information as the formulae used in the calculation of indicators.
He sorts the wheat from the chaff, gets straight down to explaining the things that work in trading. And his explanations are simple and concise....unlike many trading authors whose books give you a headache, but not much else.

His usees the 30 week Weighted Moving Average (WMA) in such an effective and commonsense manner that you'll be wondering why you didn't think of it yourself.
He'll show you why you don't need to spend one single mintue of your time on fundamental analysis, and in fact that you'll probably trade better without it. With Stan's method you can eliminate the need to ever read the financial pages again, simply by knowing how to interpret the information given by the price action in relation to the 30 week WMA.

He'll show you an approach to the markets that's half way between trading and investing...for want of a better name I'll call it 'tradevesting'.
He's not in and out of trades every few days or weeks, as traders tend to be, but neither does he buy a stock and then make the mistake of holding on to it even when its price is getting decimated.
His very sensible approach is that your investments should be performing strongly for you at all times, under all market conditions, and if they're not, then sell out of the under-performers and sink those funds into a strong performer.

I know several people who were losing traders, but completely turned their trading results around as a result of reading Stan's book and implementing his strategies.

He publicly disclosed his trading strategy more than twenty years ago, and since then it's been learnt and used by millions of traders around the world. Yet it remains just as effective today as it ever was.

Stan is interviewed every few months on Nightly Business Report, which airs on Friday night in the US, and can be viewed in Australia at 12.30 pm each Saturday on SBS.

Bunyip

 

[Dutchy3]

Hi Bunyip

Hear ... hear ...

Ove the years I've occassionally tried to find a web site that Stan is in some way associated with to no avail. Thanks for the tip on SBS.

Has anyone been successful in locating him in the web?

 

[RichKid]

Found a neat little summary here, it's recommended there that you read the book but I thought this would be a good primer, a few of us here trade small speccies in stage 1 so it might help us to read the book: http://www.incrediblecharts.com/technical/breakout_model.htm

 

[Dutchy3]

Thanks RichKid

Here's one from our own market that has proven to be a goody and to my mind a great example of the Weinstein model

Two years of conflict between buyers and sellers produces 100% in about 6 months if the signals are read and the breakout is adhered to. Indeed the selling of the past week still does not produce a sell signal.

Volume also expands on the run up.

Interestingly I did a scan of all ASX stocks (average turnover greater than $200K per day) last night and could only find 1 that (perhaps) is in stage 1 or 2 and reconciles to the Weinstein model. We have had a fantastic run of late and stage 3 stocks abound .....

 

[coyotte]

Read Stan's book several years ago --- you will find many references to it @ the incredible charts forum a couple of years ago --- in the achives

the only problem i had with his method, is from memory he says to stay with the stock whilst it above its 30 WMA (eg : stage 2 ) BUT to sell when it turns into a stage 3 (just below the top)

this stage 3 stuff i feel calls for personal judgement and needs other methods not mentioned by him to determine

ORX being a typical exampale --- surely "stop losses " Long & Short would have been well and truelly past by now ( out @ the worst $3.30 ) or do you hang on presuming it's not a stage 3 --- down to $2.30 (present 30wma) waiting for the bounce ?


don't really know if the bit about sectors is really appliciable to Oz , with such a small market


This book is more for a bull market only --- which i think "Guppy's Trend Trading " or Leon Wilson's work is far more appliciable to Oz

 

[rbbrain]

This discussion thread is now a couple of years old; but for any relative newbies reading, Stan Weinstein's book "Secrets for Porfiting in Bull and Bear Markets" is now more than 20 years old, but is still regarded as an all-time classic. It is a must-read for people starting out.

Stan's book provides good explanations of his Stage Analysis, and his method of using a 30-week MA on weekly charts. And later in the book he explains that he "back-tested' this simple methodology over decades of charts of the Dow, and concluded that this sort fo strategy is successful in helping us to avoid every bear market. That is, basically setting a sensible Stop Loss, and selling stocks at the appropriate time to avoid losing capital.

Cheers

 

[Billyb]

This discussion thread is now a couple of years old; but for any relative newbies reading, Stan Weinstein's book "Secrets for Porfiting in Bull and Bear Markets" is now more than 20 years old, but is still regarded as an all-time classic. It is a must-read for people starting out.

Stan's book provides good explanations of his Stage Analysis, and his method of using a 30-week MA on weekly charts. And later in the book he explains that he "back-tested' this simple methodology over decades of charts of the Dow, and concluded that this sort fo strategy is successful in helping us to avoid every bear market. That is, basically setting a sensible Stop Loss, and selling stocks at the appropriate time to avoid losing capital.

Cheers

In the middle of reading the book now. He talks a lot of the importance of Relative Strength in his methodology. However, I'm unable to find Relative Strength on my CommSec chart nor at Yahoo Finance or Google Finance. It's a bit time-consuming to calculate relative strength on a weekly basis. Anyone have any suggestions? I have difficulty in accepting his methodology when I'm unable to utilise what he says is such a crucial component of it.

 

[rbbrain]

In the middle of reading the book now. He talks a lot of the importance of Relative Strength in his methodology. However, I'm unable to find Relative Strength on my CommSec chart nor at Yahoo Finance or Google Finance. It's a bit time-consuming to calculate relative strength on a weekly basis. Anyone have any suggestions? I have difficulty in accepting his methodology when I'm unable to utilise what he says is such a crucial component of it.

Hi,

Relative Strength is something that can be interpreted in a few different ways. In his book, Stan is referring to what many of us call "Relative Strength Comparison" or RSC. In many charting software programs, the RSC indicator is one of the standard ones.
Not sure if CommSec or other online tools can handle this.
Of course, to compare a stock to one of our indexes, then we need to decide which index, and it could be XAO (All Ords) or XJO (top 200), or XSO (Small Ords), or one of several others.

Hope this helps.

Cheers

 

[Billyb]

Hi,

Relative Strength is something that can be interpreted in a few different ways. In his book, Stan is referring to what many of us call "Relative Strength Comparison" or RSC. In many charting software programs, the RSC indicator is one of the standard ones.
Not sure if CommSec or other online tools can handle this.

Cheers

Thanks for your reply rbbrain.
I suppose the online charting tools can't handle RSC then. I will research into an appropriate charting software. Thanks!

 

[rbbrain]

Thanks for your reply rbbrain.
I suppose the online charting tools can't handle RSC then. I will research into an appropriate charting software. Thanks!

Without pushing my own barrow or showing any favouritism, my preferred tool is BullCharts. (I must declare that I run the User Group, and also sell it - I can point you to unbiased comments).

Cheers

 

[Billyb]

Without pushing my own barrow or showing any favouritism, my preferred tool is BullCharts. (I must declare that I run the User Group, and also sell it - I can point you to unbiased comments).

Cheers

Thanks. Not sure I'm comfortable paying that much at the moment, as I am just a beginner to tech trading and am currently just looking for the RSC charting function for learning purposes.
At the moment I am more interested at looking at historical charts and seeing for myself how well Weinstein's methodology has held up on Australian stocks in the past, and how successful past traders would have been had they followed Weinstein's rules.

Might be asking the wrong person here (!!), but do you know of any free charting softwares that can do RSC charting?

 

[Noddy]

Thanks. Not sure I'm comfortable paying that much at the moment, as I am just a beginner to tech trading and am currently just looking for the RSC charting function for learning purposes.
At the moment I am more interested at looking at historical charts and seeing for myself how well Weinstein's methodology has held up on Australian stocks in the past, and how successful past traders would have been had they followed Weinstein's rules.

Might be asking the wrong person here (!!), but do you know of any free charting softwares that can do RSC charting?

Try Incredible Charts. They offer a free download with more indicators than you could poke a stick at. Have this indicator installed, can play with it to your heart's content

 

[Billyb]

Try Incredible Charts. They offer a free download with more indicators than you could poke a stick at. Have this indicator installed, can play with it to your heart's content

Cheers, will give it a try.