Stan WeinStein Stage Analysis
We have seen many people investing in individual stocks got stuck with either nil/negative returns hoping that this will give returns in the future. This is because stock might be consolidating / in a downward trend. Since Our Invested funds are limited, it can remain locked in these positions for longer periods of time. But there is a method that helps to allocate our funds wisely that helps to maximize the returns. This method was introduced by Stan Weinstein, a renowned technical analyst
TECHNICAL ANALYSIS
11/23/20251 min read
Stage Analysis
A stock’s life cycle can be divided into four stages using daily/weekly charts, a 200‑day moving average and volume behaviour.
· Stage 1 – Basing / Accumulation
· Stage 2 – Advancing / Uptrend
· Stage 3 – Topping / Distribution
· Stage 4 – Declining / Downtrend
Stage 1 – Basing / Accumulation
Price moves sideways after a decline, often in a trading range.
200 day moving average is flat; price crosses above and below it.
Volume usually contracts; occasional higher‑volume up weeks can signal quiet accumulation.
Typical action: Watch list / early accumulation near the upper part of the base and on breakouts.
Stage 2 – Advancing / Uptrend
Price breaks out above resistance from the Stage 1 base.
200 day MA turns up; price holds above a rising 30W MA most of the time.
Volume expands on up weeks, confirming institutional demand.
Typical action: Main buy phase; add on constructive pullbacks while the trend and 200 day MA remain intact.
Stage 3 – Topping / Distribution
Uptrend loses momentum; price becomes choppy and often forms a range or rounding top.
200 day MA flattens; price starts violating the average from above.
Volume can expand on down weeks, indicating distribution by strong hands.
Typical action: Take profits, tighten stops, avoid new long entries.
Stage 4 – Declining / Downtrend
Price breaks down below Stage 3 support.
200 day MA turns down; price stays below a falling 30W MA.
Volume often picks up on declines; rallies tend to fail near the falling average.
Typical action: Avoid longs; aggressive traders may short weak rallies into resistance.
Key practical rules that can be followed when owning a stock:
Focus new long positions in Stage 2 stocks on daily/weekly charts.
Exit or reduce when signs of Stage 3 appear (flattening MA, failed breakouts, choppy action).
Avoid owning Stage 4 stocks.
Above method helps to allocate our limited resources properly without being stuck in a stock that is in consolidation / downtrend (Stage1 /Stage3 / Stage 4). Typically our funds should allocated in stocks that are in Stage 2. This helps to maximize the returns