What if you could read the market like a map—knowing when to buy, hold, or sell just by understanding where you are on the journey? Back in the 1980s, legendary technical analyst Stan Weinstein did exactly that by creating a system known as Stage Analysis – A method that has helped amass vast fortunes ever since.
Time-tested strategy
Stan Weinstein’s stage analysis is one of the most robust and time-tested frameworks in finance. It breaks down every stock and market into four repeatable phases, giving traders and investors a crystal-clear roadmap to follow trends—not fight them while using a simple 30-week moving average.
Background
Stan Weinstein is a veteran known for his 1988 book Secrets for Profiting in Bull and Bear Markets, which according to me is one of the best and most comprehensive books ever written about technical analysis and charts. In it, he laid out a practical, visual framework for identifying the significant phases in a stock or market lifecycle.
Weinstein himself experienced a stock market crash in 1962, while still in college, where he lost a lot of money. This made him realize that he could not rely solely on fundamentals, and therefore started to study charts. Over time, he noticed that stocks went through stages where they would base, break out into uptrends, lose momentum, and eventually drop. This was the seed from which he developed Stage Analysis.
The Four Stages of Stage Analysis
Weinstein’s Stage Analysis is based on the idea that all stocks and markets move through four predictable stages, each with distinct characteristics. Recognizing which stage a stock is in can help you make better buy, hold, or sell decisions.
Stage Analysis
Stage 1: The Basing Phase
This is where the previous downtrend ends. Price action starts to move sideways. The 30-week moving average flattens out, and the stock price begins oscillating above and below the moving average. The extreme selling starts to fade out, and buyers and sellers are now about equal in number. Disgruntled sellers dumping the stock are no longer in control.
- Investor Behavior: Market participants are largely indifferent, having lost interest after the previous decline.
- Volume: Tends to dry up, indicating a lack of interest, but volume will often begin to expand in the later stages of Stage 1.
- Strategy: Wait for signs of strength and a breakout into Stage 2 before buying. Stage 1 can be a good time to collect watchlist candidates.
Above we can see the ideal buy point in Chewy Inc. according to Stage Analysis. This is at the breakout point and then at the retest of the breakout level from Stage 1 into Stage 2. Therefore, the ideal buy point is generally at the breakout into Stage 2, and not in Stage 1 per se.
Stage 2: The Advancing Phase
In Stage 2 the stock breaks out above resistance and the 30-week moving average slopes upward. Price stays above the moving average, and volume often increases on up days. Weinstein thinks that the ideal buy point is either at the breakout point or at the pullback that usually happens after the breakout when it pulls back to the breakout point or slightly above it.
- Investor Behavior: Early adopters and institutions begin to accumulate shares.
- Strategy: Look to buy on the breakout into Stage 2 or on the first pullback to the breakout point. If coming in late to the stock buy on pullbacks back to the rising 30-week MA or near support. This phase is where the majority of gains are made.
My initial analysis of Stillfront in 2019 is a good example of a stock that went through the four stages of Stage Analysis after the breakout in 2019:
The stock was trading sideways along with the 30-week moving average in Stage 1, and then it broke out of its base into Stage 2, at the end of 2019. During most of phase 2 the stock was trading well above its 30-week moving average, which is an important point in Weinstein’s Stage analysis. It did however fall back to the 30-wma at its steepest pullback, but the moving average then gave support. The moving average then flattened out along with the price and eventually went into Stage 3.
Stage 3: The Topping Phase
Momentum slows, and the price begins to move sideways again. The 30-week moving average flattens, just like in Stage 1, but now after a long uptrend. What is going on beneath the price action is that buyers and sellers are once again about equal in strength. Earlier, in stage 2, the buyers were much stronger than the sellers. Volatility often increases, the stock fails to make new highs and volume is often high. In this regard, it has a lot of similarities to the distribution phase, in Wyckoff analysis.
- Volume: May increase as distribution begins—institutions start selling to latecomers.
- Investor Behavior: The broader crowd piles in, believing the rally will continue.
- Strategy: If the stock breaks down below support at the moving average and it turns down, that’s a red flag. Another red flag is if it gains support again beneath the moving average on the rally up, after the breakdown. That could be a sign to lighten up the position and start to sell. But as long as the moving average is not turning down and RSI, fundamentals and other indicators show strength the trend might still be intact.
In stage 3 the moving average will start to turn flat and the price moves sideways. Price moves beneath the average on declines, whereas price stayed above the moving average, by a good margin, during declines in stage 2.
Stage 4: The Declining Phase
The stock decisively breaks down, below support. The 30-week moving average rolls over and the price remains below it. This is the most dangerous phase to be having a long-term long position.
- Volume: Often spikes on breakdowns.
- Investor Behavior: Denial turns into panic. Selling accelerates.
- Strategy: Avoid the asset. Or for more aggressive traders, consider going short.
This video does a good job of explaining Stage Analysis for the stock Chewy Inc. from Stage 1 to Stage 4:
Interestingly, in the video above, we can see how Chewy pulls all the way back to the 30-week moving average in Stage 2. Nevertheless, it is still considered an intact trend since the moving average is not broken and is still headed up. What later is the real sign of a coming trend change is when the 30-week moving average is broken to the downside and then starts to flatten out along with the price. Because in Stage 2 the moving average is normally not broken on pullbacks and points upward.
Why the 30-week Moving Average?
Much like the 200-day moving average used in broader market analysis, the 30-week moving average acts as a reliable trend filter in Weinstein’s system. It smooths out price noise and helps to define each stage clearly.
Here are some good thumb rules:
- Price above a rising 30-week MA = Stage 2 (Bullish)
- Price below a declining 30-week MA = Stage 4 (Bearish)
- Flat MA with sideways price = Stage 1 or Stage 3 (Transitional)
Applying Weinstein’s Method in Practice
- Most traders use it on Weekly Charts: Weinstein’s analysis is best suited for swing and position trading over weeks or months—not for intraday trades.
- Look for Confirmation: Volume, RSI and relative strength (vs. a benchmark like the S&P 500) can offer additional confirmation.
- Weinstein puts a lot of emphasis on volume, although I am not sure if he would have done so in today’s market, because a lot of big banks and institutions can now hide their volume through new technical tools and programs.
- Be Patient: Waiting for a clean Stage 2 breakout saves you from false starts and dead money periods. Don’t jump on every trade. Or consider buying at the earlier point that is recommended by Wyckoff Analysis and talked about in the video above.
- Use Stops Wisely: Keep stops below key moving averages or previous support levels to manage risk.
Final Thoughts
Stan Weinstein’s stage analysis offers more than just a trend-following system—it provides a framework for understanding the psychology of markets. By aligning your strategy with the current stage, you dramatically increase your odds of success—buying strength, avoiding weakness, and staying on the right side of the market. From quiet basing to euphoric tops and painful declines, each stage reflects a shift in investor sentiment and positioning. Whether you’re navigating bull markets or dodging bear traps, the approach offers a timeless strategy to stay on the right side of trends.
“The key to making big money is to position yourself at the right stage—not just buy a ‘good company’ and hope.”
— Stan Weinstein
