Confirmed Stage 2 Uptrend

10 jam lalu

From the Book Think and Trade Like a Champion The Secrets, Rules & Blunt Truths of a Stock
Market Wizard - MARK MINERVINI

THE TREND TEMPLATE
You don’t have to go to business school; you’ve only got to remember one thing . . . you always
want to be with whatever the predominant trend is.
—Paul Tudor Jones
STAGE 2 ONLY
In my first book, one of the fundamental building blocks I discussed was
“Stage Analysis”—and, in particular, the importance of Stage 2. Like all
stocks, superperformance stocks go through stages. There are four distinct
stages. The cycle through all four could take several years or even decades.
The stage you want to focus on is Stage 2. I avoid going long a stock in any
stage except Stage 2. During the other three stages (1, 3 and 4), you are either
losing money or losing time.
When a stock is in Stage 2, it increases the odds that big buyers are in there
supporting the stock. Based on studies of the biggest winning stocks going
all the way back to late 1800s, more than 95 percent of those stocks made
their huge price gains while in a Stage 2 uptrend. That is fact, not opinion.
Wouldn’t you rather be in sync with a 95 percent probability of a stock being
in a big winner, than in the 5 percent club?
I identify the four stages based on what is happening in the stock’s price
action:
1. Stage 1: Neglect phase: consolidation
2. Stage 2: Advancing phase: accumulation
3. Stage 3: Topping phase: distribution
4. Stage 4: Declining phase: capitulation
I made on indicator confirmed Stage 2 uptrend.

1. Stock price is above both the 150-day (30-week) and the 200-day (40-
week) moving average price lines.
2. The 150-day moving average is above the 200-day moving average.
3. The 200-day moving average line is trending up for at least 1-month
(preferably 4 to 5 months or longer).
4. The 50-day (10-week moving average) is above both the 150-day and
the 200-day moving averages.
5. The current stock price is at least 25 percent above its 52-week low.
(Many of the best selections will be 100 percent, 300 percent, or more
above their 52-week low before they emerge from a healthy consolidation period and mount a large-scale advance).
6. The current stock price is within at least 25 percent of its 52-week high
(the closer to a new high the better).
7. The relative strength (RS) ranking (as reported in Investor’s Business
Daily) is no less than 70, but preferably in the 90s, which will generally
be the case with the better selections. (Note: The RS line should not be
in a strong downtrend. I like to see the RS line in an uptrend for at least
6 weeks, preferably 13 weeks or more.)
8. Current price is trading above the 50-day moving average as the stock is
coming out of a base.
My Trend Template outlines the criteria I apply to every stock I’m
considering. It’s my qualifier, or what I refer to as “non-negotiable
criteria.” Any stock that fails to make the cut is off my radar.
As the stock transitions from Stage 1 to Stage 2, you should see a
meaningful pickup in volume—a sign of institutional support. Looking for
stocks that are in verified uptrends allows me to make my first cut and
systematically narrow down my potential candidates. Doing this also will
help you identify the best stocks with the greatest chances of yielding highly
profitable returns. With your hard-earned money on the line, finding
superperformance takes a set of criteria based on sound rules and the
discipline to adhere to them.
Amateurs, however, very seldom trade this way; when they do, it’s rarely
consistent. Here’s how their thinking goes: They missed the boat on
Facebook’s big run-up, so now they look for a chance to buy it when it
appears to be “cheap.” Or they notice Twitter has been going down, so they
assume it must bottom sometime soon, because hundreds of millions of
people are tweeting all day. People who buy this way are all but guaranteed
to do real damage to their portfolios—it’s just a matter of time.