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Trading breakouts with stage analysis
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Trading breakouts with stage analysis

  #11 (permalink)
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Stage Analysis

I found a pdf of his Global Trend Alert advisory service newsletter from March 2005 that he did (still does?) for Institutional Investors. I'm not sure if this is still going but it supposedly cost institutions $40,000 a year for the service and shows various charts of stocks and markets at the different stages and analysis of them, which I think helps to see, as it helps you to identify the stages he talks about in the book on some actual charts. Here's the pdf:

https://futures.io/attachments/51208d1317996797

I think this gives an important update to the book, as the book was written 23 years ago and he's clearly refined the system a little bit since then. For example, the four stages now have extra definitions with A, B, + and - symbols. So you now have a Stage 2B, and if the technical pattern is outstanding it is labelled 2B+

Here's the definitions of the stages from the newsletter

Stage 1A - Start of a base. Needs much more time.
Stage 1 - Basing Phase. May begin accumulation.
Stage 1B - Late in base-building phase.Watch for breakout.

Stage 2A - Early in uptrend stage. Ideal time to buy aggressively.
Stage 2 - Advancing Stage
Stage 2B - Getting late in uptrend. Watch carefully. But still a hold.

Stage 3A - Looks as if a top is starting to form. Be sure to protect holdings with a close stop.
Stage 3 - The Top Area. Start to reduce positions.
Stage 3B - Has become increasingly toppy. Use rallies for at least partial selling.

Stage 4A - Stock has entered Downtrend Stage. Close out remaining positions.
Stage 4 - The Declining Stage. Avoid on the long side.
Stage 4B - Late in downtrend. Much too soon to consider buying.

Additional ratings
(A) Early in that Stage.
(B) Late in that Stage.
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Below is the simple diagram from the newsletter to give the descriptions above some context.

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Another thing that I think is really useful about the Global Trend Alert newsletter pdf, is that it has all the S&P 500 stocks marked up with their stages from the 25th February 2005. I think this is great as you can go back in your own charting package to that date and get a much better idea of the various stages and hence become better at identifying them. As the charts in the book were very small and the print quality wasn't great. So I think this will really help my understanding of the stages.

On that date the Stage Ratings Overview had the following:
Stage 1 - 8%
Stage 2 - 58%
Stage 3 - 18%
Stage 4 - 16%

So you should have around 40 examples of Stage 1, 290 examples of Stage 2, 90 examples of Stage 3, and 80 examples of Stage 4 to look at. There are also ratings of the sectors, some etfs and secondary stocks in there.

I plan to create a spreadsheet and go through them one by one to create my own reference guide so that I can use them to identify the stage on my charts in the future.

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Trading breakouts with stage analysis-margta_part1.pdf  
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Stage 1A - examples

As a follow up to my previous post outlining the break down of the four stages, I've been going through the Global Trend Alert Newsletter to get some real life examples of the various stages to use as a reference in the future.

Stage 1A - Start of a base. Needs much more time

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Attached Thumbnails
Trading breakouts with stage analysis-agn_2-25-05.png   Trading breakouts with stage analysis-avy_2-25-05.png   Trading breakouts with stage analysis-brcm_2-25-05.png   Trading breakouts with stage analysis-cce_2-25-05.png   Trading breakouts with stage analysis-jbl_2-25-05.png   Trading breakouts with stage analysis-ko_2-25-05.png   Trading breakouts with stage analysis-kss_2-25-05.png   Trading breakouts with stage analysis-mxim_2-25-05.png   Trading breakouts with stage analysis-pgn_2-25-05.png   Trading breakouts with stage analysis-ter_2-25-05.png  

Trading breakouts with stage analysis-thc_2-25-05.png   Trading breakouts with stage analysis-tif_2-25-05.png   Trading breakouts with stage analysis-xlnx_2-25-05.png  
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Stage 1 - examples


Stage 1 - Basing Phase. May begin accumulation.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Attached Thumbnails
Trading breakouts with stage analysis-a_2-25-05.png   Trading breakouts with stage analysis-abc_2-25-05.png   Trading breakouts with stage analysis-amat_2-25-05.png   Trading breakouts with stage analysis-bmy_2-25-05.png   Trading breakouts with stage analysis-hpq_2-25-05.png   Trading breakouts with stage analysis-ipg_2-25-05.png   Trading breakouts with stage analysis-lsi_2-25-05.png   Trading breakouts with stage analysis-wpi_2-25-05.png  
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Stage 1B - examples

Stage 1B - Late in base-building phase. Watch for breakout.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Attached Thumbnails
Trading breakouts with stage analysis-cah_2-25-05.png   Trading breakouts with stage analysis-intc_2-25-05.png   Trading breakouts with stage analysis-klac_2-25-05.png   Trading breakouts with stage analysis-nvls_2-25-05.png  
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Stage 2A - examples

Stage 2A - Early in uptrend stage. Ideal time to buy aggressively.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Attached Thumbnails
Trading breakouts with stage analysis-kr_2-25-05.png   Trading breakouts with stage analysis-txn_2-25-05.png  
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Stage 2 - examples

Stage 2 - Advancing Stage

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Attached Thumbnails
Trading breakouts with stage analysis-abt_2-25-05.png   Trading breakouts with stage analysis-azo_2-25-05.png   Trading breakouts with stage analysis-bax_2-25-05.png   Trading breakouts with stage analysis-cpwr_2-25-05.png   Trading breakouts with stage analysis-emc_2-25-05.png   Trading breakouts with stage analysis-nsm_2-25-05.png  
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Breadth and the S&P 500

The breadth indicators I follow are showing some positive signs and are in a good field position. The fastest indicator, the Percent of Stocks Above 50 Day Moving Average ($NYA50R) has given a buy signal by breaking out above 30%.

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The slower SPY/TLT has also moved back to a buy signal for the first time since Junes sell signal, but can give the occasional whipsaw so requires confirmation.

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The Percent of Stocks Above 200 Day Moving Average ($NYA200R) has reversed to a column of Xs, but still needs another 12% of stocks to move back above their 200 day moving average to give a new buy signal.

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The NYSE Bullish Percent Index ($BPNYA) or head coach, has reversed into a column of Xs in a good field position - 27.54% of stocks are now on P&F buy signals. But I want to see a move above 30% before I get more bullish.

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Finally, the S&P 500 hasn't given a P&F buy signal yet, and even if it did, the volume is anemic at the moment and doesn't fulfill the criteria of the method of being at least two times the recent average volume so I'm going to remain cautious until I get confirmation. So for that reason and because the 30 week moving average is still falling I think we are now in Stage 4B - Late in the downtrend. Which is much too soon to consider buying for a medium to long term position. However there might be an opportunity for some short terms gains, although I'm inclined to short any rally at the moment because of the lack of confirmation.

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Stage 2B - examples

Carrying on my reference guide of the different stages - using the Global Trend Alert newsletter. Here's some real life examples of stocks in Stage 2B from February 2005.

Stage 2B
- Getting late in uptrend. Watch carefully. But still a hold.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Attached Thumbnails
Trading breakouts with stage analysis-aapl_2-25-05.png   Trading breakouts with stage analysis-adsk_2-25-05.png   Trading breakouts with stage analysis-aes_2-25-05.png   Trading breakouts with stage analysis-apa_2-25-05.png   Trading breakouts with stage analysis-apc_2-25-05.png   Trading breakouts with stage analysis-ati_2-25-05.png   Trading breakouts with stage analysis-axp_2-25-05.png   Trading breakouts with stage analysis-csx_2-25-05.png   Trading breakouts with stage analysis-mo_2-25-05.png  
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Carrying on my reference guide of the different stages - using the Global Trend Alert newsletter. Here's some real life examples of stocks in Stage 2B from February 2005.

Stage 2B
- Getting late in uptrend. Watch carefully. But still a hold.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Thanks for your posts. You may want to look into Mark Fisher book " The Logical Trader". Paul Tudor Jones calls him the best pit trader ever. After 2 years of loosing money I became profitable 9 months ago after reading Mr. Fisher book.

His method is a breakout method. I also ordered Weinstien's book. Do you know of any other book which talks about breakout method preferably written recently to accommodate changes in the market place.

Thanks,


Last edited by mfbreakout; October 13th, 2011 at 01:23 AM.
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Stage 3A - examples


Stage 3A - Looks as if a top is starting to form. Be sure to protect holdings with a close stop.

Key
(+) Outstanding pattern in that Stage.
(–) Unexciting pattern in that Stage.

Attached Thumbnails
Trading breakouts with stage analysis-amd_2-25-05.png   Trading breakouts with stage analysis-ccl_2-25-05.png   Trading breakouts with stage analysis-ctxs_2-25-05.png   Trading breakouts with stage analysis-dhr_2-25-05.png   Trading breakouts with stage analysis-ed_2-25-05.png   Trading breakouts with stage analysis-fisv_2-25-05.png   Trading breakouts with stage analysis-gps_2-25-05.png   Trading breakouts with stage analysis-key_2-25-05.png  
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