Stan Weinstein published one really good text book in 1988, Secrets
for Profiting in Bull and Bear Markets,
in it he promoted a number of key strategies and concepts.
30-week Moving Average (MA)
This is one of Weinstein's key principles. In the weekly chart
of the XAO above, the blue curve
is the 30-week Moving Average (MA). For as long as the price stays
above the 30-week MA, and
the MA line is heading upwards, Stan says the index (or stock)
rising. But if price crosses below the MA and the MA
flattens and heads down, then there could be rough times ahead and it
is time to sell. For example, in January
2008 and late April 2010.
a Weekly price chart
The coloured ribbon across the bottom of the above chart is
Analysis ribbon (as applied in BullCharts
Weinstein said that at any one point in time, a stock (or an index)
will be in one of four market "stages":
For more information about Stage Analysis, see Brainy's
eBook (PDF) Article
trading strategies - Weinstein" (Toolbox Member password
required), and you can refer to
Weinstein's book, "Secrets
for profiting in Bull and Bear Markets".
- Stage 1 the Basing Area (also known as
consolidation or accumulation phase)
- Stage 2 the Advancing Stage
- Stage 3 the Top Area (also known as the distribution
- Stage 4 the Declining Stage.
Simple MA or Weighted MA?
is often discussion about whether Stan used a Simple, or a Weighted,
Moving Average. Here are some notes with reference to his book.
Acknowledgement:- The text and table above are from Weinstein's book.
- Page 13: "...Over
the years, I've found that a 30-week moving average (MA) is the best
one for long-term investors, while the 10-week MA is best for traders
to use. A 30-week MA is simly the closing price for this Friday night
added to the prior 29 Friday weekly closings. Divide that figure by 30
and the answer is what's plotted on this week's chart...".
- Page 25: "...Mansfield
charts do not give a simple 30-week MA where all 30 weeks count
equally. Instead, they use a weighted 30-week MA where by the most
recent action counts far more than the old input. This makes the MA
more sensitive to current activity and helps it reverse direction
faster. The drawback to their weighted average is that it leads to a
few more whipsaws..."
313 includes the diagram labelled Chart 9-2 (shown at right), and
provides a detailed explanation of how to easily calculate a 30-week
simple moving average (without a calculator or computer) as follows:
get the first plot for your 30-week MA, simply add up the 30 weeks on
your calculator or computer and get the total (853). Put that answer in
the total column. Then divide by 30 and you have your starting point
for the MA (28.43). In the following weeks, there is no need to repeat
the lengthy process of adding up the new 30 weeks. Simply add the 31st
week (27.2) to last week's total, then subtract out the oldest week
(the oldest week's total in this case is 30.0 - remember to cross it
out on your data sheet...".
Readers are encouraged to study further details in his book,
for profiting in Bull and Bear Markets"
(McGraw-Hill, 1988) available from good book shops, including the Educated
Investor financial bookshop:- www.educatedinvestor.com.au
Note also that a 30-week WMA appears somewhat similar to a 20-week or
is also interesting to understand that Weinstein developed and tested
his approach over a long period of time, and when computers were only
scarcely available. And the computers that he might have had ready
access to were probably the text-based version (the first incarnation
of Windows was available in late 1985 with only a limited range of
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Copyright 2012-2013, R.B.Brain -
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Last revised: 7 February, 2013.