PYPL - Quick breakdown Using Mark Minervini's stage analysis
This is just a quick analysis that I did up using Mark Minervinni's stage analysis , Looks like a perfect example of a stock that achieved super performance that now is entering the final stage , which is stage 4.
If you have not read Marks books , I highly suggest picking them up , the best of the bunch in my opinion is his " How to trade like a stock market wizard " . Very valuable resource to any traders knowledge base .
One of the most important concepts from Marks book for me was the stage analysis. It's very useful and fairly easy to identify and asses if you know what you are looking for . The logic is that there are 4 stages of a stocks cycle , this is arguably true for most stocks. Even if stocks are not super-preformers, which Mark's book especially focuses on identifying, they will still often follow these 4 stages of movements.
The 4 stages are as follows :
Stage 1 is the neglect phase or "consolidation"
Stage 2 is the advancing stage or "accumulation"
Stage 3 is the Toping phase or "distribution"
Stage 4 is the declining phase or "capitulation"
The Stage 4 or Capitulation phase , which I believe PYPL is currently in , is always accompanied with massive selling volumes , this is very much because institution's have changed their view on the future of the company and decided to stop buying and supporting the share price's advancement . If you look at the monthly charts volumes, the last three months have been predominantly selling with a total volume around 580 Million , which is about half of the float . Obviously there is some brave bulls in this volume still buying but I think that there is a good possibly that around 70 % of that volume will be institution's selling .
Eventually , many stocks do recover from capitulation like this but there is often a second leg down and a longer term stage one will quite often be required to, once again, enter the advancing stage ( Stage 2) . Sometimes, this becomes year's and sometimes the stocks never do come back . I think that once we see a stage 4 setup like this , then we should wait for a stage one to form before considering a long and still a stage 2 or a breakout of a base is a much better setup .
It's important to recognize what stage a stock is currently exhibiting to increase the probability of your long setups and this is probably one to stay away from at this time , perhaps an ok day trader depending on your style but not a safe swing trade or investment at this time .
Just an opinion and the purpose of this posting is simply to share some of the basics of Mark's stage analysis .I want to mention also that Mark's stage analysis method is also very much in line with Stan Weinstein's book as well , which is titled "Secrets for profiting in bull and bear markets ". Stan's book is right up there with Mark's too, hard to pick a favorite of the two to be honest because they both are wonderful and have taught me very important lessons.
One last note , often after a large move up , stocks need some time to digest and thus will form a base , this is similar to a stage 3 much tighter . The best super-preformance stocks do not usually build more than 6 bases during its stage 2 cycle , 4-5 is more common though before stage 3 eventually sets in. Stage 3 has some similar traits to a base but is typically wider and looser price action . Also, although using stage analysis like this helps us to make assessment's of a stocks health anything can happen in the markets , as always . This is just a tiny part of what Mark's books have to offer and he has much more in depth explanation's of it too.
If you have not read Marks books , I highly suggest picking them up , the best of the bunch in my opinion is his " How to trade like a stock market wizard " . Very valuable resource to any traders knowledge base .
One of the most important concepts from Marks book for me was the stage analysis. It's very useful and fairly easy to identify and asses if you know what you are looking for . The logic is that there are 4 stages of a stocks cycle , this is arguably true for most stocks. Even if stocks are not super-preformers, which Mark's book especially focuses on identifying, they will still often follow these 4 stages of movements.
The 4 stages are as follows :
Stage 1 is the neglect phase or "consolidation"
Stage 2 is the advancing stage or "accumulation"
Stage 3 is the Toping phase or "distribution"
Stage 4 is the declining phase or "capitulation"
The Stage 4 or Capitulation phase , which I believe PYPL is currently in , is always accompanied with massive selling volumes , this is very much because institution's have changed their view on the future of the company and decided to stop buying and supporting the share price's advancement . If you look at the monthly charts volumes, the last three months have been predominantly selling with a total volume around 580 Million , which is about half of the float . Obviously there is some brave bulls in this volume still buying but I think that there is a good possibly that around 70 % of that volume will be institution's selling .
Eventually , many stocks do recover from capitulation like this but there is often a second leg down and a longer term stage one will quite often be required to, once again, enter the advancing stage ( Stage 2) . Sometimes, this becomes year's and sometimes the stocks never do come back . I think that once we see a stage 4 setup like this , then we should wait for a stage one to form before considering a long and still a stage 2 or a breakout of a base is a much better setup .
It's important to recognize what stage a stock is currently exhibiting to increase the probability of your long setups and this is probably one to stay away from at this time , perhaps an ok day trader depending on your style but not a safe swing trade or investment at this time .
Just an opinion and the purpose of this posting is simply to share some of the basics of Mark's stage analysis .I want to mention also that Mark's stage analysis method is also very much in line with Stan Weinstein's book as well , which is titled "Secrets for profiting in bull and bear markets ". Stan's book is right up there with Mark's too, hard to pick a favorite of the two to be honest because they both are wonderful and have taught me very important lessons.
One last note , often after a large move up , stocks need some time to digest and thus will form a base , this is similar to a stage 3 much tighter . The best super-preformance stocks do not usually build more than 6 bases during its stage 2 cycle , 4-5 is more common though before stage 3 eventually sets in. Stage 3 has some similar traits to a base but is typically wider and looser price action . Also, although using stage analysis like this helps us to make assessment's of a stocks health anything can happen in the markets , as always . This is just a tiny part of what Mark's books have to offer and he has much more in depth explanation's of it too.
Nota
Note to add : Some commenters have asked me to clarify the fact that Stan Weinstein's book, "Secrets for profiting in bull and bear markets" , which uses the same method of stage analysis, was published beforehand and that Stan deserves credit for this ( I agree he was first and I should have been clearer about that detail ). That being said , I am pretty sure Richard Demille Wyckoff(1873–1934) beat both of them to it in his version though .
艾力克~
Penafian
Maklumat dan penerbitan adalah tidak dimaksudkan untuk menjadi, dan tidak membentuk, nasihat untuk kewangan, pelaburan, perdagangan dan jenis-jenis lain atau cadangan yang dibekalkan atau disahkan oleh TradingView. Baca dengan lebih lanjut di Terma Penggunaan.
艾力克~
Penafian
Maklumat dan penerbitan adalah tidak dimaksudkan untuk menjadi, dan tidak membentuk, nasihat untuk kewangan, pelaburan, perdagangan dan jenis-jenis lain atau cadangan yang dibekalkan atau disahkan oleh TradingView. Baca dengan lebih lanjut di Terma Penggunaan.