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One of the most important aspects of technical analysis is identifying the current trend of a stock. More traders lose money trading against the longer term trend than nearly any other trading mistake. Institutional investors accumulating (uptrend) or distributing (downtrends) shares in a company is what ultimately creates the trends we see on the chart.
Stage Analysis was created by legendary trader Stan Weinstein as a way to simply identify the trend a stock trades in. It is broken down into four separate stages:
Stage 1 - Basing
Stage 2 - Uptrend
Stage 3 - Topping
Stage 4 - Downtrend
We use the charts of ROKU, ELF, and UBER as examples to point out different stages the stock trades in along with details about their basing/consolidation areas. As traders, locating these tight areas on the chart presents us with the best risk/reward spots to start a position.
With tight areas we can use tighter stops and limit the risk needed to take to a trade.The top of this area of consolidation is often referred to as a pivot, because it is a pivotal moment in time where momentum should enter the market. That momentum move, or breakout, is the typical buy point for swing traders.
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- The TraderLion Team
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Timestamps:
00:00 - In this Episode...
00:40 - Reading Price Bars
04:53 - Calculate Closing Ranges
07:27 - Weekly Closing Ranges During Corrections
09:42 - Identifying Trends
18:03 - Stage Analysis & Examples
26:21 - Bases & Consolidation Areas
39:10 - Spotting Tight Areas
51:17 - Pivot Points
1:03:24 - Breakout Checklist
1:04:35 - Pullback Checklist
#technicalanalysis #stockcharts #swingtrade
