Welcome!
Welcome to Next Big Trade Premium where I aim to deliver quality stock market research and education using Stan Weinstein's Stage Analysis to members of this service. I firmly believe Stage Analysis is the best stock market trading system ever invented and my goal is to 1) show how I apply the system to the current market and 2) pass on what I've learned over the years using the system.
How I Breakdown The Market
My favorite way of breaking down the stock market is using the "Forest To The Trees Approach" in Stan Weinstein's book Secrets For Profiting In Bull And Bear Markets. This process involves determining the following:
- What is the trend of the overall market?
- What sectors are leading (or lagging) the market?
- What stocks look the best (or worst) technically in that sector?
If the trend of the overall market is bullish then you want to look for sectors that are completing Stage 2 breakouts and the best stocks in those sectors. Conversely if the trend of the overall market is bearish it's better to either largely be in cash or looking for shorting opportunities with stocks completing Stage 4 breakdowns. Bear markets overall are much trickier to trade than bull markets so heavier cash positions and a more tactical approach is the best way to navigate them.
Newsletter Format
The newsletter will mimic the Forest To The Trees Approach by discussing the trend of the overall market, leading and lagging sectors in the market, and stocks that are completing or setup for Stage 2 breakout or breakdown. The types of sections in the newsletter are described below:
Trend Of The Major Indices And Market Health
This section will go over the trend of the major market indices and some important market indicators to determine what is the major trend of the market.
Long Term Review
Periodically it will be useful to take a step back and look at the current trends in the market and where things might be going. This would include taking a look at multi-year moves in different asset classes to determine what the current trends are and what could be changing in the markets.
Sector Review
This section will go over the sectors that are leading the market when the overall trend is bullish and sectors lagging the market when the overall trend is bearish. It will be important to narrow down the leaders and laggards since stock market outperformance is typically derived from trading the best or worst sectors during any given stock market cycle.
Sector Deep Dive
Periodically it will be useful to take a deeper dive into stocks in a particular sector because the sector is providing explosive Stage 2 breakouts and numerous trading opportunities. Typically the best stocks in a sector will breakout first, but if the sector trend is strong enough more stocks in the sector will continue to breakout. So it is important to carefully study sectors where this is occurring to maximize trading opportunities.
Reviewing Previous Breakouts And Watchlist Stocks
This section will review stocks highlighted as Stage 2 breakouts or on the Watchlist in past issues. The goal here is to show whether things are "working" as in breakouts are following through or "not working" as in a stock breaks out and then fails and moves back lower. When stocks start working and especially in a group/sector move typically more stocks will follow along.
Leading Stocks
This section will periodically discuss the stocks that are leading the market. Leading stocks by my definition are stocks that display the following characteristics:
1) They trade with no resistance (or very minimal resistance) and are making new highs in an uptrend.
2) They start outperforming the rest of the stock market much earlier than other stocks. They "lead" the market higher. In a bear market this can go on for months before the rest of the market goes back into an uptrend.
3) They are often part of a "theme" or "group/sector". As we know from Stage Analysis getting the sector right is key to finding the best stocks and outperforming the stock market. So these stocks offer "clues" as to where the future leadership in the stock market might reside.
Quarterly Performance Review
This section will review the best performing stocks in the market on a quarterly basis and where their Stage 2 breakouts occurred. The goals here will be the following:
1) Situational awareness - understand what is leading the market in terms of themes and group strength. Often other emerging related themes can be traded from understanding what is currently leading the market.
2) Process review - it's impossible to trade every Stage 2 breakout, but Stage Analysis is a process that helps identify the best breakouts which lead to the best stocks. So by reviewing the best stocks it helps to reinforce whether the Stage Analysis process is being followed correctly.
Stage 2 Breakouts
The Stage 2 breakout is the ideal buy point in Stage Analysis and this newsletter will feature stocks completing Stage 2 breakouts. The Stage 2 breakout will be evaluated according to the attributes of a high quality Stage 2 breakout. Each week the best Stage 2 breakouts will be featured.
Stage 4 Breakdowns
When the trend of the market is bearish Stage 4 breakdowns will be featured as they will have higher odds of working in a bearish environment. When the overall trend is bullish they will likely be omitted since profit potential is much greater trading the long side of the market in Stage 2 uptrends.
Watchlist
The watchlist will feature stocks that are setup for Stage 2 breakout or Stage 4 breakdown. The stock market is an endless stream of opportunities, and by maintaining a watchlist a trader can take advantage of new opportunities as they arise.
Questions?
Any questions can be directed to me either on Twitter: @nextbigtrade or E-mail: justin@nextbigtrade.com