After losing money during the 1962 stock market crash while invested in fundamentally sound stocks recommended by respected services, Stan Weinstein studied thousands of charts and developed the basis of what would become Stage Analysis. Stan was determined to find the ideal time to buy a stock.

Stan researched different investing and trading strategies, studied thousands of charts, and began to notice a recurring pattern. Stocks would trend, form a base, and then continue the trend or reverse.

Over time, Stan systemized rules around his successful trading strategy. Stan Weinstein’s Stage Analysis characterizes four unique stages throughout a stock’s price movements.

“Stan Weinstein’s Secret For Profiting In Bull and Bear Markets” quickly became a well-respected comprehensive guide to investing that focuses on timing the market.

This blog provides an overview of Stan Weinstein’s Stage Analysis and each of the four stages.

Stage Analysis Overview

When you take a step back to look at the big picture, all stocks will repeat a similar pattern. The image below depicts the natural progression of a stock’s price action.

During his studies, Stan noticed there were four distinct stages throughout every market cycle.

• Stage 1: Basing Area
• Stage 2: Defined Uptrend above the rising 30-week Moving Average
• Stage 3: Topping Phase
• Stage 4: Defined Downtrend below the declining 30-week Moving Average

Stan Weinstein relies on weekly charts paired with the 30-week moving average. Using weekly charts removes the noise associated with quick emotional price movements.

Stage 1 Base

The Stage 1 Basing Area occurs after a stock has declined and gone through a prolonged sell-off. Throughout the basing area, supply and demand shifts into equilibrium, and the stock moves sideways.

COIN had a multi-month downtrend as the 30-week moving average resisted price movement lower. As the price moves sideways, the Stage 1 Base may take months to years to develop.

During this sideways chop, it is best to avoid trading the stock as there is no defined trend. The price will whipsaw up and down around the 30-week moving average, eventually leading to a loss of momentum.

Stage 2 Advance

The Stage 2 Advance occurs when the price breaks out of a resistance area over the rising 30-week moving average. This Stage 2 uptrend is often where substantial profits can be generated due to sustained price increases.

After NVDA reclaimed the 30-week moving average it began its Stage 2 Advance as a leader in the market. The Stage 2 uptrend can last months to years while providing an opportunity to make life-changing money.

Trade on the long side when the stock is increasing in price and above the 30-week moving average. The ideal time to buy a stock is when the price is breaking out of a resistance area with an increase in volume.

The strongest stocks will form a consolidation area above the moving average and then break out on large volume again. A sustained uptrend will show signs of institutional accumulation with an increase in volume on up weeks and a decrease in volume on down weeks.

Stage 3 Top

Eventually, momentum will slow when demand decreases and a Stage 3 Top will form. The transition From Stage 2 to Stage 3 will see an increase in distribution with violent price movements lower on an increase in volume.

When AMZN began moving sideways after its Stage 2 Advance, distribution volume materialized. Sentiment shifted with an increase in selling pressure as the price oscillated around the flattening 30-week moving average.

After you have held a position for an extended period, look for signs of decreasing demand to ensure you maximize your profits. Be on the lookout for sideways price action, when down days have an increase in volume, and up days have a decrease in volume.

Stage 4 Decline

The Stage 4 Decline is the opposite of the Stage 2 Advance. After the stock moves sideways during the Stage 3 Top it will continue to get weaker and break supportive price areas under the declining 30-week moving average.

After a Stage 3 Top, PINS broke key supportive price levels below the declining 30-week moving averages. Note the lack of any accumulation volume after distribution increased.

After many weeks of oscillating near the 30-week moving average and support area, the selling pressure will finally overpower the stock and break it down. After a stock enters a Stage 4 Decline, there will be multiple rallies on lighter volume that will be resisted and ultimately fail.

Stan Weinstein Screener Presets In Deepvue

Deepvue partnered with Stan Weinstein and other top traders to develop screeners to help you find stocks at any stage within Stan Weinstein’s Stage Analysis.

In the Screener module, navigate to the Screener Preset tab and type Weinstein. You will see accompanying screens for each of the four stages.

Click the Star to Favorite any screen and pin it to the top of your Watchlist module. Click the three dots to duplicate any screen in your saved screens to make it your own.

Stage Analysis Indicator

To visualize Stan Weinstein’s Stages on your charts, use Deepvue’s unique Indicator. Type in Stage Analysis

The colored background can be added to your charts or any pane behind any other indicator however you have your layout setup.

This visual representation identifies each of the four stages. At a quick glance, you can easily determine when you should be buying a stock and when sell signals begin to appear.

Key Takeaways

When analyzing stock charts, Stan identified the ideal time to buy a stock by dividing the price trend into four stages. Stan Weinstein’s Stage Analysis characterizes a basing period, uptrend, topping phase, and downtrend.

Make sure you are trading on the right side of the trend.

Stay away from stocks moving sideways in a Stage 1 Base and Stage 4 Top. Trade long when the stock is in a Stage 2 Advance and short when the stock is in a Stage 4 Decline.

Use Deepvue’s Screener Presets to help identify stocks in each stage of Stan Weinstein’s Stage Analysis.

By adding the Stage Analysis Indicator to your charts, you can easily visualize which stage a stock is currently in.

Frequently Asked Questions