Stan Weinstein's framework of four market stages a stock passes through: base-building, advancing, topping, and declining — defining when to buy and when to avoid.
Deeper Explanation
Weinstein's Stage Analysis provides a framework for understanding where a stock is in its cycle. Stage 1 (base): the stock moves sideways after a downtrend — institutions are quietly accumulating. Stage 2 (advance): the stock breaks out above its base and begins a sustained uptrend — the buying opportunity. Stage 3 (top): the advance stalls, the stock moves sideways with increasing volatility — distribution is occurring. Stage 4 (decline): the stock breaks below support and enters a downtrend — the time to be completely absent. Momentum investors only participate in Stage 2: buying on the breakout from Stage 1, holding through Stage 2, and exiting as Stage 3 signs appear.
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