STAN WEINSTEIN - Professional Trader.

Updated: May 25, 2021

Stan Weinstein - Secrets To Profiting In Bull & Bear Markets.



October 19th 1987 you would have been forgiven for not knowing the name Stan Weinstein, but just a few weeks later he became famous for predicting a 31% crash in the stock market.

Did he have some form of psychic power you may ask, rather, he simply used his chart reading skills, in particular he studied and applied the ‘cyclical stage analysis theory’ which we will cover shortly.

Some say this book is the only book you will ever need to trade the markets, let’s look inside the mind of this trading legend….

In this animated video we present ‘Secrets for profiting in bull and bear markets’ by Stan Weinstein.

After predicting the 1987 stock market crash Stan Weinstein appeared in interviews on television shows like ‘Moneyline’ and ‘Wall street week’ and inspired sales for this book.

In one interview he said;-

″I don’t want to be a guru, I don’t want the idiot investor who’s looking for the perfect stock strategist. The stock market is sort of like gambling, it’s another form of probability playing. I’m a real good probability player.″

Like that of Jesse Livermore and Nicolas Darvas, Stan Weinstein looks to identify the market trend, identify strong industry groups and align the best stocks within the groups to the trend direction.

Stan believes that these stocks coupled by following the trend provide an edge, whilst used in conjunction with stop losses to manage risk you have a profitable strategy.

Before we look at the selection criteria used by Stan, let’s quickly summarise the chart presented early in the book which is the foundation of his teaching.

First, we have a trading range, where prices move in a sideways motion forming a channel of support and resistance.

We then see the price breakdown through the support level, give a brief pullback and then continue its decent downwards staying below its 30 week moving average.

Again, we see the price enter a trading range but this time breaking out above the resistance level, a brief pullback and then continuing its ascent whilst remaining above its 30 week moving average.

Stan provides more detail in his book but there are three key points that are worth making note of;

One. The longer the duration price is spent in a trading range, the more significant the breakout of the channel.

Two. The greater the expansion of volume at the point of breakout, the more bullish the signal.

Three. The price must be above the 30-day moving average in order to enter a buy position.

Understanding the principles within this diagram is paramount in order to apply Stan Weinstein’s strategy.

Similarly, trendlines are given particular significance and the level of significance is determined by how many times price touches the trendline, or in this case the support line.

Anything more than 3 touches is deemed significant according to Stan. Here we have 4 touches of a rising support line, but when the price violated the support line here on the 5th attempt, alarm signals should have gone off.

Breaks of a significant trendline like this could be a signal of a major change, especially on a weekly or monthly time frame.

Stan also suggests the direction of a trendline can determine the significance of a break, for example, here we can see a declining trend line and a breakout above the trend, and although this is still a bullish signal it is less bullish than a horizontal breakout which we can see here.

In terms of timeframe when considering a particular trendline, Stan prefers to look at the weekly chart and refers to himself as an investor, although categorises his trades into short, medium and long term cycles.

For example, he considers short term as being a one to six week holding period, medium term from six weeks to four months and long term from four to twelve months.

This is what Stan refers to as intelligent trading timeframes, anything less like day trading is only smart if you want to make your broker rich.

Regardless of price action and trendlines Stan says the stock has to be in one of four market stages.

Here we can see stage 1 the basing phase, stage 2 the advancing phase, stage 3 the topping phase and stage 4 the declining phase.

Stage 1 and 3 is an indication that an equilibrium has been achieved and price will consolidate in a sideways fashion, this is accompanied by the flattening of the 30 week moving average line.

The preferred time to buy a stock would generally be within this green shaded area whilst the preferred time to sell a stock would be in this red shaded area, although further considerations need to be made to find the optimum time to buy.

In many cases (which Stan refers to) the optimum time to buy in the zone is here on the exit of stage one, and perhaps a less preferable time to buy in the zone is here.

Conversely, the best time to sell or short a stock would be here on the exit of stage 3 and the lesser preferred time to short a stock would be here.

Remember, Stan is all about playing the odds and by keeping within this framework you move the odds in your favour…

With some of the basics established let’s look at some more strategy specific examples used throughout the book.

This chart of the company Goodyear is taken directly from the book, we can see here we have the 30 week moving average line and the breakout point.

Stan identified this breakout point for numerous reasons, for example, the price broke out of a resistance line shown here, whilst also showing an increase in volume that pushed the price above the 30 week moving average.

This was classed as a stage 1 basing phase which eventually broke into a stage 2 advancing phase.

The stock went on to double in price within 9 months.

Again, this example is straight from the book, the quality is not great but we can get further idea of the strategy in action.

This company Harrah saw a breakout from a stage 1 base, through resistance, showed relative high volume and an increasing 30 week moving average.

The stock once again entered a stage 2 advance and increased around 100% in 9 months.

The two examples we just seen were based on a stage 1 breakout around the optimal zone, this is what Stan calls the ‘investors way’.

Stan points out that after a general market correction there are many examples of these stage 1 breakouts, however, during a mature bull market there are far less, at which point he switches tact slightly. He calls this the traders way and suggests stocks are more often than not purchased here, within the stage two advance.

The example from the book can be seen here and shows how the trend may look in the stage two advance. Notice how the principle remains the same, a consolidation in price and a breakout above resistance. The key difference here is the already mature rising 30 week moving average.

Let’s look at an example provided in the book.

Despite the quality of the chart we can work out the concept Stan discusses.

Here we can see the stage 1 basing phase and the eventual breakout point leading into a stage 2 advance.

A few weeks later we see a stage 2 consolidation period on top of an already advancing 30 week moving average line. At point B here we see the breakout through resistance which is accompanied by a typical spike in volume.

20 weeks later the stock advanced 200% without retreating to the moving average. This Stan says is the trader’s way.

He also suggests investors should be looking at taking most of their trades from stage 1 breakouts, whereas traders should be looking for breakouts during a stage 2 advance most of the time.

At this stage the key points to take away from Stan’s strategy are; Check the price is above the 30 week moving average, wait for a breakout of consolidation above resistance and ensure volume is considerably higher than previous weeks.

There is however a 4th that completes the foundation of the strategy. Let’s take a look.

Stan introduced t