Continuing the series of summaries of investment strategy book's, here is the acclaimed book by Stan Weinstein on Secrets for Profiting in Bull and Bear Markets. It is presented in point forms so that it is quick and easy to read.
The points includes when not to buy stock, how not to sell stocks, how to sell stocks profitably, when not to short sell stocks and when to short. In addition, Weinstein has identified the pattern on how stocks rise up and decline in FOUR stages.
Don't buy
- overall market is bearish
- stock in negative group
- stock below its 30 week MA
- its 30 week MA is decreasing
- stock has already advanced a lot
- if stock has poor volume characteristic on breakout
- stock has poor relative strength
- stock has nearby overhead resistance
- by guessing a bottom
Don't sell (stock you already have):
- sell based on tax considerations
- sell based on dividend yield
- sell based on PE or because PE is too high
- average losses by buying more stock that is going down.
- wait of the next rally to sell
- refuse to sell because market is trending up
- keep holding stock because it is high quality
Selling stocks
- use stop losses - based on MA and previous support level
- don't use stop loss based on percentages
- First stop loss should be based only on the previous support
- Other stop losses adjusted based on MA
- Increase the stop losses to higher bottoms
- use stop loss at number slightly less than a round number.
don't short
- because of high PE
- because price has rise too much
- because everyone thinks it's going to crash
- stock trades thinly
- a stage 2 stock
- stock that is in a strong group
- without protecting with a buy stop loss
- a stock that is above its Rising 30 week M.A.
- a stock with positive relative strength
Do short
- negative market
- negative group - group chart broken below 30 week MA, and declining relative strength.
- its stage 2 increase was very strong, clearly above 30week MA
- Volume confirmation not necessary for shorts, since prices on the way down don't need strong volume
- Short when the price break down below a certain level. Place buy stops at the previous peak.
STAGES
1. Base phase - trending in range
2. Advancing phase- moving strongly upwards. 30 week MA also starts increasing after breakout. BUY
3. The Top Area - 30week MA starts to level off. Place sell stop below this range.
4. Declining phase - don't need strong volume to confirm this phase. SELL
RELATIVE Strength = Price of Stock / Price of Market Average
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