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Strategies & Market Trends : Strictly Buy and Sell Set Ups
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To: ~digs who wrote (4464)6/27/2005 9:33:00 PM
From: chowder  Read Replies (1) of 13449
 
There are 4 stages to a stock price's movement.

Stage 1 is the Basing Area. This is where a stock has actually been falling and comes into an area where it trades sideways for a while. It is during this stage that your moving averages stop falling and start to level out. A good basing period is 7 weeks or more. Breakouts on less than 7 weeks of basing are often false breakouts. Not always, but often.

Stage 2 is the Advancing Stage. This is the stage where where the price starts advancing, the volume picks up and the moving averages start rising. This is the stage that captures most of the price movement.

Stage 3 is the Top Area. This is where the upward movement peters out and the stock starts trading sideways again, or starts to show sharp and choppy movement. This stage is where the battle between buyers and sellers heats up again as both bulls and bears try to gain or maintain control. The moving averages will once again start leveling out. It is possible another Stage 2 can develop here but, if not Stage 4 comes into play.

Stage 4. The Declining Phase. This is where the price starts falling. It's mostly the opposite of Stage 2 with the exception of volume. Stage 2 requires increasing volume to push prices higher, prices will often fall on lower volume. In this phase, your moving averages will all be falling.

All of this is covered in the book, Secrets For Profiting in Bull and Bear Markets by Stan Weinstein. A "MUST READ" in my opinion by anyone serious about obtaining consistent profits.
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