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stan

Member

Post Number: 113
Registered: 10-2002

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Votes: 1


Sunday, December 07, 2003 - 01:20 pm:

Hail Claudius-The Technical

I agree with Spider that it's beneficial to know which Weinstein Stage a stock is in. The knowledge does dictate a trading strategy. I also agree with Snifter that Weinstein Analysis does not have to be a 'be all' and 'end all' approach.

I've been concerned about the increasing number of subjective decisions in my trading and so I decided to stack in some objective rules to stage analysis in an effort to mechanise the whole thing. Weinstein suggests traders, as opposed to investors, should use 50 day MA's. However, his longer term approach to stage analysis makes it difficult to apply the knowledge to a short or medium term trading system.

I've created a three stage concept that I applied across the XJO, twice now. The stock-screening tool allows me to update the entire XJO in about 15 minutes per week.

I share with you now stans ABC of stage analysis;

STAGE A
Price has closed above a rising 50 day EMA on a weekly chart.

STAGE B
Price has closed above a rising 30 week EMA on a weekly chart.

STAGE C
Price has closed below a falling 50 day EMA on a weekly chart.

That's it.

I did try to keep it simple.

I'll offer some comments about general price action for each stage;

Stage A Comments;
These stocks, I suppose, are potential Weinstein Stage 1 candidates. They have closed above the 50 day EMA which is rising. It's not unusual to see a stock that has bottomed out and has had a short series of higher-highs and higher-lows before reaching the 30 week EMA.

Trading opportunities are on the long side only.
The XJO should be in an inter-mediate uptrend and I happily use Colins Trading Diary for guidance there.

Initial stops should be kept below the 50 day EMA. Risk should be reduced as I believe the win-loss ratio may be only 30-40%. The good winners, stocks that eventually uptrend past the 30 week EMA will more than make up for the rather ordinary win-loss ratio.

STAGE B Comments;
These stocks are Weinstein Stage 2 stocks.
Price generally remains above the two rising EMA's, 30 week and 50 day. If price closes below a RISING 50 day EMA then it is still in Stage B.

Trading strategies for Stage B can only be on the long side. I don't require the XJO to be doing anything in particular for Stage B stocks to be traded. This is because there is a jumble of time-frames.

Stage B stocks can be traded comfortably without using any indicators. Use price patterns, M's W's, trendlines, etc, etc, etc...

STAGE C Comments;
A Stage B stock enters Stage C when it closes below a falling 50 day EMA. This really combines Weinstein 3&4 together. The concept is that the price action is in trouble in my time-frame.

A Stage C stock only enters a new Stage A when price closes above a rising 50 day EMA.
When it does this, you can find that price is also above a rising 30 week EMA and this action propels your analysis straight into Stage B as well.

Let me say that again;
Stock starts in Stage A above 50 day EMA,
moves to Stage B above 30 week EMA,
falls to Stage C below falling 50 day EMA,
re-enters Stage A above rising 50 day EMA,
and may instantly hit Stage B at the same time.

The pattern is always A-B-C-A-B-C-A-B-C.

Scan only for entries on the short side in Stage C.

In Stage C you will find stocks that have stalled on an uptrend. Take short entries with a system that confirms a new downtrend.

Stage C entries should be in the direction of the XJO.

Never go long on a Stage C stock. Wait for it to move to Stage A - closing above a rising 50 day EMA.

WHY RE-INVENT THE WHEEL?
With these 3 rules I can scan whole markets and mechanically allocate everything in that market to Stage A, B,or C relatively quickly.

The old wheel went 1, 2, 3, 2, 3, 4, 1, 1, 1, 2.. and I wasn't getting a smooth, automatic change.

Moving average cross-overs may achieve the same result, I just don't know. Maybe that's what this will lead to!

Different trading systems will be applied for each Stage.

I've only put this together in the last couple of days and though there may be further developments this is the basic concept. I don't intend making it any more difficult than this. I'd love some help to test the concept, so if you'd like to hit me with some of your favourites [open invitation] I'll start posting some examples. Also, if someone could describe how I can transfer IC watchlists onto the forum it would save a few hours later on.

Thanks,
Stan

i_claudius

Member

Post Number: 1031
Registered: 11-2002

Rating: N/A
Votes: 0


Sunday, December 07, 2003 - 01:34 pm:

Hello Stan

I am most intrigued by your thoughts ...

May I ask you to nominate some example stocks (without posting charts) at this point ...

eg a few ASX 100 stocks in each of your Stages
& if you have time some non ASX 100 stocks

I would like to apply the Claudioscope to their recent performance and see how they look

With Best Wishes

Claudius