[[Start here]] → [[What works in stocks?|what works]] → [[expose to return drivers|drivers]] → [[strong stocks beat weak stocks|strong beats weak]] → stage analysis --- Stan Weinstein in "Secrets for Profiting in Bull and Bear Markets"[^1] identified four stages in a typical, long-term share price lifecycle. These stages often repeat again and again in shares, and are sketched out below. ![[weinstein-stage-analysis.png]] - **Stage 1: Basing** - this is a period of **consolidation** often after a significant decline. The share price languishes sideways around its 30 week moving average price (30 week MA), bobbing up and down between support and resistance. - **Stage 2: Advancing** - the stock breaks out of the base on *increasing volume*, and above the 30 Week MA. This is a period of **accumulation** by institutions and intelligent traders. This is the ideal time to buy - either on initial breakout, or on the first pullback. The 30 Week MA moves into an uptrend. As the uptrend continues, any shakeouts and temporary drawdowns will remain above the 30 Week MA. There can be multiple bases on the way up. - **Stage 3: Topping** - the 30 Week MA starts to flatten out after Stage 2 runs its course. The share price dips below the MA and share price volatility is often at its highest in the whole sequence. This is a key area of risk and is a sign of increasing **distribution** of shares by insiders and institutions. Sometimes the share price can stabilise to prepare for another Stage 2 but often not. - **Stage 4: Declining** - this is the **capitulation** phase. The stock eventually breaks sharply below the 30 Week MA, not necessarily on increased volume. It then stays below its 30 Week MA on its journey down towards another basing area. This is the time of maximum risk. It’s when you most want to be *out.* This is of course a practically useful model, rather than an empirically backed thesis. It is common that [[strong shares break out of bases on high volume]] - which can be the best entry point, either at the start of Stage 1 (for Investors), or in intermediate bases in Stage 2. [^1]: [[Weinstein - Secrets for Profiting in Bull and Bear Markets]]