LON:IGG | Stan Weinstein - Finally Technical Indicators Made Simple(r)

22nd Oct '20 by Matthew Wood

23 comments 4980 reads

So far in my short trading/investing life I've been the following:

Value trap idiot (e.g. low P/E equals buy, thrown in CFD leverage, disaster)
Fundamentals noob (e.g. quality is all you need, growth is optional, so so results)
Growth novice (e.g. gotta be quality but its worth nothing without growth, much much better)

What's next?

Having recently listened to Stan's audiobook "Secrets for Profiting in Bull and Bear Markets" (as mentioned in Donald & Dave's great podcast) I'm at a crossroads....fundamentals mean nothing apparently! Well actually that's not what he (Stan) is saying, rather he's saying that fundamentals tell you the position today, whereas studying charts tells you where they will be in the future, based on the collective knowledge of the all knowing market. Only now I can see why the phrase "the market is never wrong" might hold some water.

A New Lens

So i'm reviewing my portfolio (which is choc full of low debt, high ROIC/ROE, growing revenue/EPS, low P/FCF stocks) with a focus on volume, price relationship to moving averages and support/resistance channels. The aim of this is to identify where each of them are in the 4 stages of Stan's cycle (these are my words not his):

Base (moving sideways from a relatively uninspiring position - could be a LONG wait)
Breaking out (something is really changing, it's on the way up - back up the truck)
Top Area (the uptrend cools off and it's either heading for a Stage 2 continuation or Stage 4 - buy more on pullbacks or get out)
Downtrend (the fun is over, someone somewhere is holding the bag and complaining on a forum that "the market is wrong")

Stan's book is old...the charts in it look like they've been drawn with a ruler and pen, a far cry from the unfathomable complexity my trading platform offers me (Saxo Trader). I now know all the best stocks to buy back in the 1975-1988 era, brill.

Is his method way too basic for today's market or has it already been refined to the nth degree that it's now morphed into something I wouldn't recognise?

Taking Action on My Portfolio

Since I have no clear method for exiting positions or setting stop losses, I decided I'd back Stan and take some action on my portfolio using his wisdom. I sold 3 positions (in profit, at a loss and at break even Inchcape (LON:INCH)…

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Matthew Wood

22nd Oct '20

Thanks @dmjram, I will definitely do some more reading and look at Gareth's visuals.

My spreadsheet (now that it's built - I'm not gonna lie, I enjoyed it) helps me whittle down stocks to do deeper research on, doesn't help me judge entries/exits though - hence why the TA study.

All the best!

wattanut

Stan's book is one of my favourites, he only wrote one book but his ideas were refined over the years for his paying customers.

There is a website dedicated to his method which is www.stageanalysis.net Lots of interesting stuff and a forum. It is run by an English guy but he seems to trade the US market mostly due to the greater amount of chart setups and liquidity.

When buying you are looking to get in on a breakout or pullback. I think Stan was quite clear on stops, if you are shorter term trader the stop would be just below the previous swing low, but if you are a longer term investor the stop would also be below the 30 wma

I'm not sure I would have sold IGG or FXPO, although the IGG price has dipped below the 30wma the price is still above the last swing low. FXPO is still above both and the 30wma is still rising.

Also one for Ed, any chance of an RS indicator ? :)

Thanks Ed, well chuffed I got a response from the Stocko man himself! This is useful stuff, tennis balls it is, much appreciated.

Thanks wattanut - I also have a good chunk in the US, so much more choice and liquidity as you say. IGG and FXPO were somewhat borderline but it was the drop off in volume that concerned me the most - and with the market being so choppy at the moment I wanted some more cash anyway.

I played the run up of FXPO to 195p on a previous trade so was trying to capture the next move up but wasn't happening convincingly enough for me.

No doubt I'll be proved wrong! Best of luck.

Edward Croft

Yeah - NCYT was a tennis ball. It half tested the gap, then rocketed back up. If you do care about your entries, this is good to know!

iapetus

23rd Oct '20

Hello Everyone,

I've found the following two Youtube channels very good for summarising the methods used by legendary share investors and traders. Many of them use/used break-out methods for getting into investments.

https://www.youtube.com/c/FinancialWisdom/videos

https://www.youtube.com/channel/UCAeAB8ABXGoGMbXuYPmiu2A

This year I've had great results after buying the following shares after they made chart pattern break-outs -

Thinksmart (TSL)
https://www.stockopedia.com/share-prices/thinksmart-LON:TSL/

Ergomed (ERGO)
https://www.stockopedia.com/share-prices/ergomed-LON:ERGO/

Volex (VLX)
https://www.stockopedia.com/share-prices/volex-LON:VLX/

Unfortunately, I haven't found an easy way of finding UK shares that have just broken out of such patterns. Some shares I'm keeping an eye on for future break-outs are -

Loopup (LOOP)
https://www.stockopedia.com/share-prices/loopup-LON:LOOP/

Hummingbird Resources (HUM)
https://www.stockopedia.com/share-prices/hummingbird-resources-LON:HUM/

Wynnstay (WYN)
https://www.stockopedia.com/share-prices/wynnstay-LON:WYN/

CMC Markets (CMCX)
https://www.stockopedia.com/share-prices/cmc-markets-LON:CMCX/

I have made some money from CMC markets this year after a previous break-out, but sold when it broke its upward trend-line.

Bob.

donald pond

I'm pleased our podcast put you on to Stan, as I think he covers things clearly with the minimum amount of smoke and mirrors and jargon....and then, I found myself reading about the Wyckoff method during the week, and he may call it accumulation and distribution and Markup and Markdown...but its the same 4 stage analysis. There really is nothing new under the sun

It's interesting how many of the UK share indices charts have settled into ranges that indicate either a break-out to the upside or downside.

It's something worth considering if one has any money waiting on the sidelines to be invested.

https://www.stockopedia.com/index-prices/ftse-aim-all-share-index-FTSE:AXX/chart2/

https://www.stockopedia.com/index-prices/ftse-250-index-FTSE:MCX/chart2/

https://www.stockopedia.com/index-prices/ftse-smallcap-ex-its-index-FTSE:SMXX/chart2/

https://www.stockopedia.com/index-prices/ftse-techmark-all-share-index-FTSE:TASX/chart2/

Does anyone know how to chart company sectors using Stockopedia?

Bob.

HumourMe

Does anyone know how to chart company sectors using Stockopedia?

Get a list:

e.g. https://www.stockopedia.com/se...

or in much more detail https://www.stockopedia.com/se...

Search for each item in the search box.

Get to its page e.g. https://www.stockopedia.com/in...

Press the 'Add to folio'

Go to folio.

Select item, select 'chart'.

So possible :-/

I'm unaware of a page with this already set up. When you've added everything to the portfolio you can then use 'chart view'

to get mini charts - which is nice.

PLS1nve5t

try "Browse", "Market Data", "Sectors", I like to sort by stock rank, then the "Chart View" box as HumourMe has suggested

Thanks HumourMe.

That's a useful solution.

Bob.

The Phoenix

24th Oct '20

Hi Ed in the above two examples you have the 200 day m/a and you quote the 30w and 50w what is the logic in using so many why not just go with say the 30w (presumably this equates to 150 day i'm excluding weekends) ?

Thanks Andy

XTR

25th Oct '20

FT has a free page of mini sector charts, not good enough for proper stage analysis but adequate for identifying the 1Yr trend at a glance.

I second wattanut's request to Ed for a Relative Strength option, preferably based on the Mansfield formula favoured by SW. If this were to become available along with sector charts, Stockopedia would be the only resource I'd ever need and, in my opinion, the best subscription service by a country mile.

30th Oct '20

Thanks for the suggestion XTR. I will look it up. :o)

I've also found this webpage -

http://www.livecharts.co.uk/share_prices/sector-indices.php

If you click on each sector you get to a web page giving even more information, including a link to a technical analysis chart and a list of the sector constituents.

Bob.

abiggins

22nd Nov '20

Hi Matt- what a fascinating read. I too am a big fan of Weinsteins - if fact of all the books I;ve read on investing = maybe 40 or 50, dunno - his is yje one I rate highest and indeed about the only one I look at. Minervini is good too but, owing a lot to Weinstein and not being quite as good. What are in your sights at the mo if you don;t mind me asking?. I hold miners - CAML and SLP and PLUS, Tremor and record and have my eye on ncc,cer, ncyt, oxig and spt

7th Dec '20

Hi "abiggins" (any idea how to link users in replies - might be useful so people know when they get a response, I've only just seen your reply!).

Wow that's a lot of books - I do find that reading lots of different methods/strategies really helps, you end up subconciously synthesising it all and that slowly forms your "style".

You've got a few good ones in there:

- CAML, don't know it I'm afraid but I'm not annoyed I sold FXPO as its broken out big time...still so much to learn. Iron mining is doing very well.

- SLP, been on the watchlist for some time but my trading platform doesn't list it :(

- PLUS, bought this late Oct but got shaken out 9th Nov in the intraday drop...stop loss too tight! The market seems to be wary of this one, competitors like IG and CMCX have significantly higher PEs. Could be a key resistance around 1650p - thatcould be make or break so I haven't got back in.

- Tremor, NCC, NCYT, OXIG, don't know these ones

- Record, its on my "Ace" watchlist but I'm fully allocated at the moment

- CER, another one my platform doesn't list (have to pay £50 to trade manually)

- SPT, sold for a small profit at 279p end Oct, its momentum has died off recently but I'm keeping a close eye on it.

In terms of new opportunities I'm mostly looking at the US - my scoring systems seem to really like US stocks. In the UK (other than Record) I'm watching Polar Capital (POLR).

Happy to chat further, wish I had someone to bounce off - none of my friends are interested (or at least not interested in doing it properly!).

Matt

cafcash49

6th Jan '21

I'm clearly late to this party but I hope you pick it up. I too read Stan's book recently and I am now very much a convert and trying to get in at early stage 2 and out before stage 4 sets in. I have also recently discovered Ichimoku Clouds and set up a chart on SP with Ichi and MACD. So I always look at this for any share. Ichi's look very complicated but use You Tube to learn about it and you will see it is less complicated than it looks. I think they compliment Stan's ideas very well. I hope this helps.

8th Jan '21

Thanks Cafcash49, will take a look!

Neil D56

11th Jan '21

Hi Matt,

Alas more often than not these issues boil down to personal psychology and risk appetite.

It is always useful however to have some ideas on targets, stops and adding etc. Having been in financial markets for over 40 years, mostly as a commodity trader/fund manager I guess I should have accumulated some perceived wisdom. Currently running my own SIPP so investing for continued growth even as I drawdown some money each month.

With regard to stock trading I am fairly loose on fundamentals- suffice to say I have to like the stock (in terms of its product/service) or at least understand what it does!

My basis is this- if a stock moves to 50% profit I will analyse mainly technically (am a chartist so watch the Bollingers and Ichimoku clouds from the daily, weekly and monthly perspectives to see if the 'heat' is still in the trade. If not I will sell half and give myself a free run on the rest- especially if it coincides with longer term tech resistance. On stops I generally like the -20% scenario, either from point of inception or the high. But I will scrutinise chart pattern to see if that concurs.

I have recently subscribed to this site and am finding the stock info quite useful in applying to my own Watchlists on Saxo ProTrader platform. I hope this is in some way useful, and happy to chat more if you require.

Neil

Stan Weinstein - finally technical indicators made simple(r)

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Matthew Wood

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