Interview with Stan Weinstein | Stage Analysis Secrets | The TraderLion Podcast | Ep. 1

Interview with Stan Weinstein | Stage Analysis Secrets | The TraderLion Podcast | Ep. 1

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[Music] welcome to the trailline podcast i'm richard moglin here with ross haber and to kick things off we have a very special guest stan weinstein stan is the author of the well-known book secrets for profiting in bull and bear markets where he coined the highly influential concept of stage analysis he is currently the editor and publisher of global trend alert advising institutional investors stan welcome to the show thanks so much for being here hey my pleasure awesome so to start things off uh the process you enumerate in your book is almost entirely based on technicals uh many investors nowadays seem to ignore charts and focus only on financials or fundamentals what would you say to these people to convince them to incorporate chart reading into their process okay first of all you know when i was young i used to proselytize i wanted everybody to use technicals i'm way past that in fact on a kidding around basis i say now it's good there are some people who will never use technicals and we need that because if everybody use charts who we sell our losing stocks to so the bottom line is that people that are open-minded and really are willing to you know learn that you need offense as well as defense to score in a football game you need technicals at the minimum integrated with your fundamentals and there's a reason why i'll share this with you richard most people don't know but i have a degree in economics and many a year ago gee it must have been probably 40 years ago i used to do so many interviews i remember some interviewer asking me say stan what did you have to do to become successful in the market and he thought i was being facetious but i said put my economic degree on the side and learn to be totally technical right right yeah combining fundamentals and technicals and and listening to what the price action is is actually saying that seems to be the way to go and just reading that supply and demand as best as we can definitely richard let me give you a perfect example timely wise what's going on right now if you're just strictly a fundamentalist and a few of my fundamental clients you know override the technicals and they're paying for it gold is a perfect example if you just take a look from a fundamental point of view we all know the government is irresponsibly no longer talking billions but trillions and they're spending money like crazy and you'd say oh my god gold is a buy and long term it probably will be but right now we put out a cell several weeks ago on gold and it's been going down and paying no attention to what the fundamentalists would expect so again i always listen to the action of tape i wrote that in my book many years ago it's not the news but how the market reacts to the news that's really important 100 and for listeners out there who have not yet read your book first of all i highly recommend it there'll be a link down below in the description but stan could you briefly discuss the kind of four different stages within the stock's lifecycle and also how you kind of differentiate between them sure i think that's a relevant thing and it's so straightforward and it found sounds almost too easy to be really a success part of the equation successful in the market but here we go stage one a stock let's let's use numbers just to illustrate what i'm talking about stock has had a big decline richard it's fallen from let's say 25 down to eight over many many months it's been bad now it starts to finally dig in and build a base and just like a house needs a foundation a stock before turning around people think oh if i catch the bottom of the movie go up that that's just a short-term wiggling jiggle a stock needs to build a base right foundation before it starts event so we go into stage one it starts to move sideways but let's make believe now it's going between eight and ten dollars and then and let's use a 200-day moving average and let's say the 200-day moving average is still like at 14. even though the base has started you're still too premature you want the 200 ama to be close to the base now it's a couple of months later it's still bouncing back and forth between 8 and 10 but the 200-day moving average let's say it's at 10 and a half now you're ready to talk turkey it's in the stage 1 base boom it breaks out not only above the resistance of 10 but it also now goes above the 200-day moving average of 10 and a half you've completed the base and gone into stage two which is the advancing phase and that's the ideal time to enter a stock interesting enough when he is still in the base the news will usually be bad right it's no longer going down on the negative news that's a positive indication now you're in stage two now obviously stocks don't go straight up but let's say over the next six to nine months the stock goes from 10 to 20 and you have corrections along the way but all of the short-term corrections happen and hold above the rising 200-day moving average short-term wiggles and jiggles aside you're still in stage two it's great eventually now let's say it's a year later the stock has gone back up to 20. it starts to roll sideways between let's say 20 and 22. and the 200-day moving average is maybe 19 and a half you moved into stage 3. interesting enough richard at this point the news will usually be good because there's a reason why the stock had this big move now people first pick up their wall street journal and other newspapers they'll say oh everything is terrific and they'll buy and that's a mistake the stock is no longer going up on the good news you're now the mirror image of stage one where the news was bad but you didn't go down it was basing now the news is good it's no longer going up it's rolling sideways you're in stage three you start doing reducing to make it simple eventually you break below that floor of support at 20 you break below the 200-day moving average which is close let's say 19 and a half you've gone into stage four at that point irrespective of what you think fundamentally i'm a seller i think now you've seen the high for the cycle and if you look well obviously it's not perfect there's always going to be one or two exceptions now and then in general when you study charts you'll see this pattern repeats over and over again right if people learn how to play it i'm not going to be facetious say it's easy but the market becomes straightforward and much more profitable absolutely and um in your in your book you talk about the ideal buy point for both investors and also for traders um could you talk about what those are and also what you're looking for in terms of volume price action right at those levels you've obviously done your homework rich you're doing a great job leading me so here we go ask but like we just said before the stock when it was in stage one i have some of my institutions and that's basically what says institutional product although i do have some high value net worth individuals also in here but basically institutions because they're not buying an odd lot or they'll start doing early accumulation knowing they're early well it's still in the stage one base but never when it's all stage four right then eventually as you just alluded to you break out you go top side above the ten and a half it's going to stage two that's the ideal time both for traders and investors to buy but now we're going to become even more sophisticated if a given stock breaks out into stage two it's kind of like eggs they're not all of the same quality all breakouts are not of the same quality so let's say um chart a breaks out yeah it's good it moved into stage two but the volume doesn't pick up that's probably just going to be a so-so stock and you don't want to do aggressive buying there conversely we have stock b which not only broke out above its resistance at 10 and a half but in addition the volume picked up significantly and i like to see at least twice the normal volume of the past 30 days right that's a good sign and even better in some cases it'll be triple the volume a stock that breaks out in heavy volume usually has a tiger in the tank and those are the ones that again we're playing a probability game never guaranteed those are the ones that'll usually end up being the big winners and now i'm going to give you a subtlety a third one which i wrote my book many years ago if those two things happen but we're still going to become even more finely tuned one is in just a so-so group and another which we should talk about later in this interview another is in a hot group i'd always go with the one in the hot group that puts all of your odds in the in your favor perfectly put and i was actually going to touch on that on how you analyze group strength as well so um could you talk a little bit about your force to the trees approach how you go from market analysis group analysis all the way back to selecting the highest potential stocks that you want to buy on those breakouts obviously here we go first again we're playing a probability game anybody who tells you oh i know the market is going to do this or i know this stock is a definite winner is a liar only the liars are always right in fact i wrote my book which most other people don't do they only tell you about the good stuff i put a chapter in the book where i spoke about losing positions and i remember writing that even though it was like 40 years ago i remember writing the words that how you handle a losing position will make you a winner in the market so it's very it's very important that you you blow out if something doesn't work i honestly think if we really do our good work we can be right 75 80 of the time but only the lawyers are right 100 percent and when you're wrong hey it's like you get another taxi coming along you get out of that one you pick up a good taxi it's the same thing in the market now to go to your question the forest of the prison trees approach one it's again we're dealing in the ideal world you want to have the market behind you so you start with are you in a good healthy market which until a few months ago it was terrific now i've downgraded it in the last two three months from a rip-roaring bull market and now we're only moderately favorable it's basically an even steven market which we should talk about in a moment as good as this bad stuff here but anyway you want the market behind you then you go down to oh what are the best groups like right now for argument's sake you know this is a very split tape but there are some groups i like like we've been having clients in the last several weeks buying stocks like in the building products area coal stocks aluminum in the more conservative area i've had them buy a lot of reits which have been great a lot of utilities and for more aggressive players even though short term they're extended i like some of the crypto stocks the cryptocurrency stocks at the same time there are a lot of bad groups we want to stay away from even though they're rallying short-term i don't like the airlines um cruise lines restaurants etc etc but anyway so you want a good group so you go from the market is in your favor to the groups that are the best then within those groups richard you look for the best dawn looking stocks best risk reward characteristics within those groups and hey it's a filtering process and if you do that like i told you you're never going to be 100 right but first of all it's an interesting thing that most people don't realize i've seen over the years clients who play the game right can be right less than 50 of the time focus on that less than 50 of the time and you can make tremendous amount of money if you let your winners run and you quickly get rid of the losers and i think we can do a heck of a lot better than that i think that as i said before we should be able to bat at least 75 percent and again you've got to be realistic most people don't realize hey you're playing a game of probabilities don't forget the last person did 400 many a year ago was ted williams when he hit i think it was 406. hey that's still meant to be made out six times out of ten right right perfect and um how should investors size their positions does it depend of does it depend on the quality of the breakout and kind of what are your thoughts on concentration versus diversification you're asking so many good questions there's no one magic answer richard you know i always when i used to be on the seminar circle which i no longer do i used to say you buy and sell to the sleeping level some people you know will go very aggressively and they just want to hold a few positions or other people that take a look at oh my god you're turning your account into a mutual fund and they won't have a hundred i don't think there's a magic answer i would just say that for me i think that it's a mistake even though some people swing for the fences to just have three or four positions because if you turn out to be wrong even though you win when you're right you win big you get hurt significantly conversely you can over diversify so i would say you know something like 15 or 20 positions that are all good positions maybe four or five percent for each position and then if one or two don't go your way you're not going to be blown out of the water i think makes sense i'm a little more conservative that way but again each person has to decide what their risk level is and how adverse they are to risk wonderfully put and i think this is a really good question too uh on the other side of the coin once you're already in a position say you brought a bought a breakout right at 10 as it's moving into a stage two uptrend um how should traders and investors manage the position using your methods and do you wait for a stock to break certain key moving averages and sell on weakness or do you also kind of look to sell some into strength and sell proactively at all you're asking so many good questions and there's really a lot of answers there depending on who you're talking to but let's start with the investor for the investor it's really easier um he should or she depending who they are they should buy initially at least half the position when it breaks out then when you see it's not a false breakout let's say you bought it when it went through 10 and a half and hey it only went to 11 then it fouls up and it breaks back into maybe nine and a half it's not working right you're not going to buy any more and i'd start reducing conversely now let's be optimistic it broke out through 10 and a half it ran up to 13. okay you're very happy now it

pulls back and it really the the old ceiling of resistance richard should now be the floor of support roughly so it now pulls back 10 and a half 11 and holds where the breakout was by the the other half of the position you know it's good and especially the volume came in the breakout and the volume should decline as it pulls back you you're now done boom you're fine now the investor just basically rides it but even an investor because what i'm saying now is very different than when i wrote my book in the late 80s we're dealing with the new norm this market is no longer the markets i played in the 70s and 80s this is oh my god i kid around with clients a lot of times they say you can't go to the bathroom come out without being surprised here this market is moving at warp speed so even in an investor who bought the stock at 10 and a half and let's say it becomes extended and it runs up to 16 in a hurry and it's 50 60 above its 200-day moving average i would then not be looking to sell that's the wrong word but the right word is trim or reduce right something gets very extended i would then say let's take some off i always kid around with my institutional clients and i say profit taking is not a dirty word you take a little off and again it depends on the individual market player some will take off 20 percent some will take off 30 40 it takes them off when it becomes extended you know watch for things like remember i'm talking as a trader now the stock has run up it's extended now it's starting to churn sideways it's no longer advancing on good news you take a little bit off and hey you'll put let's say you took 25 off it pulls back ideally toward the 50-day moving average which is a short day moving average it holds there you start putting it back on so that's how the investor plays the trader plays a whole different game and the trader has to be on top of it night and day when he sees it the stock is extended boom he should take off much more than the investor does and then if down the road richard at any point i'm talking for traders now at any point the stock breaks below its 50-day moving average the trader should be 100 out while the investor should be cutting back further perfect so stan i'm gonna zoom us out big picture real quick and then uh back in a little a little tighter i was just curious um you know if you do do you take into account and do you use and you know is there any way you analyze the health of the overall market or look at the you know general indexes or is that just not do you look at you just look at your stocks for your information um and then i guess from there i was you know dialing in you know really focusing in other than your price volume you know the charts that we we discuss in your book is there any other and i i know just from your newsletter you've got um your propriet i'm sorry your proprietary indicators so uh that was basically it is there any sort of um analysis you do on the general you know markets overall health and do you have any you know what other indicators are you looking at maybe that uh you could spit out for us again another couple of great questions russ we could go on forever with this interview but here we go i'm trying to keep i'm trying to keep it basically simple you know like the old days of the seminar i just say keep it simple not that was stupid because yes keep it simple stupid i'm trying to keep this simple here but you're raising a lot of good questions and this is what i deal with in my global trend alert which i put out a daily update a weekend update and then a quarterly in-depth 70-80 page report every quarter so there's a lot a lot of other things which i can't go through quickly in this interview today but yes there are other factors we should look at like for argument's sake the market was super healthy a few months ago where that's why it used to be an old cliche in the street you know don't mix don't confuse and mix brains with a bull market anybody can make money when the market's hot okay right now we're really separating the boys from the you know the men from the little boys and the girls from the very little girls this is a very difficult market right now um you know so now yes you have to factor in the overall market which i'll just give you an interesting thought and these are kind of things i talk about in the global trend alert you have to take a look and say hey last thursday just a week ago from the doing the interview today the s p hit another new all-time high hooray it should have been great we should be rocking and rolling and i put out now not a major cell but that night a short-term warning to do trimming rather than buying because i use what i call positive and negative divergences and the s p made a new high a week ago today a week ago thursday but none of the other market indexes confirmed that breakout in addition the next day on friday the next day on tuesday the next day on wednesday so far today there have been more declines than advances in the next three sessions that's not good action so that's one thing that short term was warning us oh you know this tape is not beneath the technical surface quite as strong as the s p would have us believe another subtlety that i spoke about that night was that while the market made a new all-time high if you're using the s p you should have in my weekend update at least twice as many buy recommendations as cells and i you know i have no brief with this i'm just a reporter i report what i see actually in this past weekend's update that i sent out to institutional clients that there were it was even steven i think we had two or three more buys and sells that's not exactly quote-unquote kosher there's that's a mark of warning is how split it is and how it's narrowing down viciously here so i'm not telling you oh be a bear but i'm telling you better be on top of your game here because i already see roughly 50 500 50 of all stocks are already in their own private bear markets even though the overall market isn't and that's an important thing to understand and then you go back because we can study history and say gee are there any similar times that you've seen something like this and here's where you know i think that i can bring something that's able because i've been playing this game for 55 plus years i go back to 1973 and i remember we went through that period and don't get me wrong i'm not saying what's ahead of us it's going to be as bad as what was 1973-74 which turned out to be a grand daddy bear market but in 73 i remember vividly the dow made a new all-time high at that point in early january of 1973 but so many stocks had already narrowed down and started their own private bear market at that point at the same time the nifty 50 the go-go stocks of that day avon polaroid xerox they continued to move up into june of that year while the rest of the market narrowed i think a similar thing is happening here they just changed the costumes that they're wearing right now it's facebook and amazon down at that and google while a lot of individual stocks have already entered their own private bear markets the nifty 50 of these days which is you know the go-go stocks these days they're still doing quite well so i see a tremendous similarity and if history is a guide which i always feel that it is i know how this movie ends and while i'm not telling you it's going to be today i know the last reel is not a good one gotcha so you're really focusing on the declining breath that you're seeing in the market exactly that you just said the key word ross but you you and i used to work together when you had your fun the truth is that we all know this when breath narrows down that's not a good thing most people don't realize hey the s p last week made a new all-time high how come the advanced decline lines haven't made a new high since early june again there's something that's not quite right so we've seen this game over and over again and maybe this time quote unquote it'll be different but i don't bet on market firsts i bet on probabilities so i'm telling you i don't like the short term right now probabilities and eventually i think it's going to become a bigger problem and here's a number that everybody should write down dow 34 600. it is if we break below that level right now you're still above it if you break below that level it's like oh you're going into a bear market but you've seen that the corrections in the past several weeks have been one and two-day affairs if we break and close below the 34 600 level i think you're going to get a much more meaningful correction that's going to be more than a day or two so you know that's something else that we should stay focused on perfect uh we'll be watching those charts carefully and and watching for signs of distribution and and see what happens um stan it's been an absolute pleasure to have you on i know you've got very limited time but we'd love to have you on once again in the future and we'll have your your email and contact info linked below for any institutions who wants to get in touch and check out globally right russ let me just say one let me just let me just say one other thing sure listen stan i'm not kicking we're not kicking you off the phone we just wanted to uh you know be respected no no no no no problem but anyway um here's something that i'm offering your listeners okay first though that unlike the old days when i did the professional tape reader that was a 799 dollars you know it was nice but the obvious interface for everybody to cut to the chase where he retired the professional tape reader which was way back 20 plus years ago in 2000 global trend alert had taken over and this is mostly for institutions but it's a very expensive institutional product because you can all in addition to getting my daily updates my weekend updates my quarterly reports you can also interface with me we talk and night and day talk with these clients anyway to cut to the chase that's a big number of any institutions out there but a lot of people are soft dollar oriented and that's 60 000 a year but then when i retired the tape reader i had some clients who felt bad so they said oh is there anything you could do for us and that's what i'm gonna offer people today i said okay fine i don't talk with these people but strictly on a reading basis they can get the reading material the daily updates the same as the institutions get the monthly the weekend as well as the quarterly and that's only 2500 a quarter 10 000 a year if somebody would like to see what the product is all about but be serious i'm being fair to them so you'll be fair to me absolutely there's no way if there's no listen if there's no way it fits in budget then fine you know don't do it but if you'd like to if you'd like to see a copy of what it's all about global trend alert then here's an 800 number that they can call 800-868-7857 and just give your email to my assistant we can send out the input to you and then you decide if it works for you in the meantime russ this has been great i love working with you and for now everybody should be very very cautious this market is beyond difficult right now perfect awesome and stan listen i just want to thank you so much for uh giving that offer you know putting that out there and i would say is one thing you know i was i started off as a retail broker i was an institutional broker there for a while and i can't tell you how many guys with harvard degrees and harvard teams stuck to their fundamentals ignored the technicals and blew up billion dollar funds i would say one thing at that price it's not whether you can afford to have stan weinstein on your team it's whether you can afford not to especially for those guys who are not incorporating the fundamentals and i would say that from the from the bottom of my heart so other than that we're gonna let you run good you know happy trading today and thanks a million again stan hey my pleasure and just remember as i used to say when i had the professional tape reader the tape tells all perfect uh stan thanks again uh for answering our questions and uh yeah hope to have you on again in the future and then best of luck take care hey you have a good day man see you bye see you stan all right for everybody watching uh go ahead and leave a like down below if you enjoyed and we hope to have a whole bunch more interviews just like this one uh in their near future so stay tuned leave a like down below and subscribe to the channel if you haven't already and we'll see you guys in future videos thanks [Music] you

2021-09-13 00:59

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