Who Is Stan Weinstein?

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 Weinstein 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.

Stage Analysis was designed to help traders understand the price cycle on stock charts, aiding in identifying the best time to buy and sell stocks. This simple technique enables traders to efficiently navigate various market cycles

What Is Stage Analysis And How Does It Work?

Stage Analysis is a time-tested strategy developed by Stan Weinstein in the 1960s. After studying the price movements of thousands of stocks, he identified a cyclical pattern that most stocks follow: they base, run up, top, and then fall before basing again.

Whether you’re just getting started with trading or looking to improve your current strategies, this guide will help you navigate these market cycles. We’ll break down the four key stages of price action and explore how Deepvue can save you time by applying Stan’s framework.

When you take a step back to look at the big picture, all stocks will repeat a similar pattern. Using just the price, volume, and moving averages, Stage Analysis indicates strategic entry and exit points on a stock chart.

The Four Stages Of Price Action Explained

During his studies, Stan noticed there were four distinct stages throughout every market cycle. The image below provides a simple overview of Stan Weinstein’s Stage Analysis as the price movements are categorized into four distinct stages.

• 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’s original strategy relied on weekly charts paired with the 30-week moving average which roughly correlates with the 150-day simple moving average. As the markets have evolved, Stan has more recently noted the importance of using the 50-day moving average as a key reference point for any stock.

Stage 1: The Basing Area

Stage 1, also known as the Basing Area, is where a stock begins to stabilize after a decline (Stage 4). In this phase, the stock price moves sideways as supply and demand reach a balance, often lasting for months.

Stage 1 begins when the downward momentum slows and the trend shifts sideways. The 30-week moving average starts to flatten out, signaling the potential start of a new trend.

Key signs of Stage 1

• Price moves sideways, trading above support but below resistance
• The 30-week moving average flattens
• It can last from weeks to even years in some cases

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.

Once a stock shows signs of breaking out, such as large upward reversals or retaking key moving averages like the 50-day MA, it enters Stage 1B, which precedes Stage 2. In bull markets, many stocks transition from Stage 1 into powerful uptrends.

In the case of an IPO, it’s best to wait until there’s enough price history to analyze supply and demand. IPOs may see an initial run-up before settling into a base, typically around when the 150-day moving average appears.

Stage 2: The Advance Phase

Stage 2 is where the most significant upward movements occur, often leading to substantial profits. This stage begins with a breakout above resistance on high volume, with the price trending above the rising 30-week moving average.

During the Stage 2 Advance, stocks trend above their 50-day or 10-week moving averages and strong movers persist upward. Even though pullbacks and consolidations are common, a solid Stage 2 stock will bounce back and break out again on higher volume.

Key signs of Stage 2:

• Breakout above resistance on heavy volume
• Stock trends above rising moving averages (50-day, 10-week)
• Consolidations followed by fresh breakouts

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.

After several major moves, the stock may begin to slow its momentum, where the uptrend starts losing strength. At this point, the stock might be close to transitioning into Stage 3.

Stage 3: Top

Stage 3 is where the stock’s upward momentum begins to slow – Demand decreases while supply increases, signaling the end of the uptrend. This phase can be tricky to spot, but early signs include the stock dropping below its 10-week or 50-day MA on heavy volume.

Another red flag is erratic price action with large swings both up and down. This churning behavior, suggests that long-term holders are selling to newer, late to the game buyers.

Key signs of Stage 3:

• Stock slices below its 10-week or 50-day MA on high-volume
• Erratic price action with large swings
• The 30-week and 40-week MAs flatten

After you have held a position for an extended period, look for signs of decreasing demand to ensure you maximize your profits. Maintain a defensive stance when you recognize any sideways price action, when down days have an increase in volume, and up days have a decrease in volume.

At this stage, it’s wise to start reducing your position or exiting the stock completely.

When the indices are oscillating and distribution outpaces accumulation, be on the lookout for leading stocks to begin breaking down.

Stage 4: Decline

Stage 4, also known as the Declining Phase, is the opposite of Stage 2. This is when the stock breaks below support and enters a downtrend, with the price staying below declining long-term MAs.

This phase can last for months, or even years in some cases. It’s important not to try and pick the bottom during this stage, as the stock could keep falling. Only once the stock has formed a solid base in Stage 1 should you consider re-entering.

Key signs of Stage 4:

• Break below support with price below declining MAs
• Lower highs and lower lows
• Dangerous time to buy or hold stocks on the long side

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. When a stock enters a Stage 4 Decline, there will be multiple rallies on lighter volume that will be resisted and ultimately fail.

During a Stage 4 Decline there is no reason to be long the stock – Wait for a Stage 1 Basing Area to develop before you try and buy the stock.

Stocks in Stage 4 often make lower highs and lower lows, continuing their downward path. Once Stage 4 ends, the cycle begins again with Stage 1.

How Deepvue Helps You Apply Stage Analysis

Enhance your stock selection by screening for stocks based on their current stage with our exclusive Stage Analysis Screener. This feature lets you discover stocks exactly where they are within their price cycle, letting you find stocks before they breakout into the Stage 2 Advance.

Strengthen your stock chart analysis by viewing their current market stage with our proprietary Stage Analysis Indicator. This feature allows you to visualize where each stock stands within its price cycle directly on the charts, providing a clear picture of where the sotck fits within the Stan Weinstein’s Stage Analysus.

Our screener and indicator were developed in close collaboration with Stan Weinstein himself. This means the logic within these tools stays true to his proven strategies. Thanks to his direct input, we’ve built an approach that captures the finer details of Stage Analysis, providing traders with a reliable framework.

Apply The Stage Analysis Indicator

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

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.

Regardless of your preferred method for stock analysis, Deepvue provides a tailored solution for crafting your own personal layout. You have the flexibility to integrate this data into your analysis either by adding it as a column in your Column Settings or by configuring it within your Data Panel.

Stan Weinstein Stage Analysis Screener Presets

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.

Key Takeaways

Stage Analysis is a powerful way to understand stock market cycles and make smarter investment choices. By recognizing the four stages and using tools like Deepvue’s Stage Analysis Indicator, you can more easily spot opportunities and avoid potential pitfalls.

Each stage has distinct characteristics based on price movement, volume, and moving averages. Use Stage Analysis to determine if a stock is Basing (Stage 1), Advancing (Stage 2), Topping (Stage 3), or Declining (Stage 4).

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.