Stan Weinstein - Stan Weinstein’s Secrets for Profiting in Bull and Bear Markets

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Stan Weinsteins Secrets for

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Profiting in Bull and Bear Markets

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Stan Weinsteins Secrets for Profiting in Bull and Bear Markets

Stan Weinsteins Secrets for Profiting in Bull and Bear Markets

Stan Weinstein

McGraw-Hill NewYork San Francisco Washington,D.C. Auckland Bogota Caracas Lisbon London Madrid MexicoCity Milan Montreal NcwDclhi San Juan Singapore Sydney Tokyo Toronto

McGrawHill g

A Dwisiun of TheM:Graw-Hill Companies

4;! Stan Weinstein. I988

All rights reserved. No part of this publication may be reproduced. stored in a retrieval system, or transmitted. in any fonn or by any means, electronic. mechanical. photocopying. recording, or otherwise. without the prior written permission of the copyright holder.

This publication is designed to provide accurate and

authoritative information in regard to the subject matter

covered. it is sold with the understanding that neither the

author nor the publisher is engaged in rendering legal. accounting. or other professional service. lf legal advice or other expert assistance is required. the services of a competent

professional person should be sought.

From a Declaration of Principles jointly adapter by :1 Committee of the American Bar Asmriarimx and u Canmtittec nfPuI1Iixltz'rs.

Library of Congress Calnloging-in-Publication Data

Weinstein, Stan. Stan Weinstein's Secrets for profiting in bull and bear markets.

l. Stock-exchangcUnited States. 2. Securities United States. 3. Investment analysis. l. Title. II. Title: Secrets for profiting in bull and bear markets. HCv49l0.W363 1988 33Z.63'2 88~28l7

ISBN l55623-079-6 155623-683-2

Printed in the United States afAmeriL'a

26 27 DOCIDOC 0 9 8 7 6

To Rita, My Best Investment, and Marcy, Marla, and Marni, My Best Dividends

ACKNOWLEDGMENTS

Id like to thank those whose contributions made this book possible, beginning with those chart services whose graphs I drew on so extensively to clarify my points:

Commodity Research Bureau, 30 S. Wacker Drive, Suite 1820, Chicago, Ill. 60606 (Tel. #18008267685)

Daily Graphs, P.O. Box 24933, Los Angeles, Calif. 90024 (Tel. #2l38207011)

Dow Theory Letters. P.O. Box 1759, La Jolla, Calif. 92038 (Tel. #6194540481)

M. C. Horsey & Co., 120 South Blvd., Salisbury, Md. 2180] (Tel. #3017423700)

Market Charts Inc., 20 Exchange Place 13 Floor, New York, N. Y. 10005 (Tel. #2125090944)

Mansfield Chart Service, 2973 Kennedy Blvd., Jersey City, N. J . 07306 (Tel. #20I7950629). This is one chart service that I owe a special debt of appreciation to as they not only granted permission for the reproduction of many charts, but also supplied me with several old charts from their archives.

I'd also like to thank several colleagues for whom I have great respect:

Yale Hirsch and Arthur Merrill who were generous enough to let me draw on their studies of market cycles, and Richard Russell who allowed me to reproduce his historical charts on the Dow Jones Industrial Average.

Robert Diamond of Drexel Burnham who was extremely help- ful in obtaining historical data.

vii

vlii Acknowledgments

Robert Fisher of Thompson McKinnon for keeping me and my staff in touch with the markets houriy moves while I worked on this book.

My Professional Tape Reader staff for helping in my research and for keeping their fingers in the dike while I gave my all to this book.

I appreciate the support and assistance of other special people including:

My many Professional Tape Reader subscribers who have so loyally supported my work over the years and made people want to read and hear my market opinions.

The very helpful and cooperative team at IRWIN Professional Publishing who made this book priority and helped bring it out so quickly. One special member of that team, my editor, Dick Luecke, was great to work with. His advice and guidance were very important in giving this book a cohesive direction and making it more readable. I am truly indebted to him.

My late father for first introducing me to the fascinating swings of the market and whetting my investment appetite at a very young age.

My mother for giving me my first market stake and always believing in me.

My daughter Marla for taking time out from her rigorous col- lege schedule to both type and read the manuscript. Her sug- gestions were excellent and I appreciate her being available at all hours of the day and night.

My three wonderful daughters, Marcy, Marla, and Marni who make my life just a bit more special every dayfor giving me the time, space, and understanding to write this book while I secluded myself in my study.

My wife, Rita, for wrestling with the word processor and mak- ing many excellent suggestions about the content. I also want to thank her for always being there for me and for choosing to make the journey through life with me.

Writing this book was a really tough task and I thank you all.

Stan Weinstein

CONTENTS

CHAPTER 1 It All Starts Here! 1

My Philosophy of Investing. Why the Technical Approach. Lets All Speak the Same Language. Quiz. Answers. ChartsThey Come in All Forms. Reading the Mansfield Chart.

CHAPTER 2 One Glance Is Worth a Thousand Earnings Forecasts 31

Stage 1: The Basing Area. Stage 2: Advancing Phase. Stage 3: The Top Area. Stage 4: The Declining Phase. Buy the Numbers. Now Its Your TL1rn. Quiz. Answers. The Real World.

CHAPTER 3 The Ideal Time to Buy 58

How, When, and What. The Investors Way. The Traders Way. Under the Microscope. Using Buy-Stop Orders. Buying within Limits. Buying and Selling Patterns to Be Aware of. What Not to Buy. What to Buy. My "Forest to the Trees Approach. How to Implement the Strategy. Selecting the Sector. Heres How It Works. Quiz. Answers.

CHAPTER 4 Refining the Buying Process 96

The Less Resistance the Better. The Importance of Volume. Its All Relative. Quick Reference Guide on

ix

X Contents

Buying. Further Tips for Buying. Double-Barreled Action. Bigger Is Better. Stans Dont Commandments. Quiz. Answers. Don't Put All Your Eggs in One Basket.

CHAPTER 5 Uncovering Exceptionai Winners 139

The Triple Confirmation Pattern. Quiz. Answers.

CHAPTER 6 When to Sell 164

Donts for Selling. Selling ProperlyThe Investors Way. Sell-Stop Orders. Sell-Stops in the Real World. The Traders Way. Trending toward Profits. Measuring the Move. Learning How to Win by Learning How to Lose. The Philosophy of Selling, or Dont Give Back Profits Needlessly. Quiz. Answers.

CHAPTER 7 Selling Short: The Less Traveled Road to Profits 215

Why Is Short Selling So Feared? Common Mistakes When Shorting. Other Short-Selling Errors. Summary of Short-Selling Donts. How to Do It Right. When to Sell Short. Taking Some Profitable Steps. Placing the Order. Never Too Late? Especially Profitable Formations. Projecting a Target. Protecting Your Short with a Buy-Stop. Using Buy- Stops the Traders Way. Trendlines on the Downside. Another Way of Reducing Risk. Quiz. Answers.

CHAPTER 8 Using the Best Long-Term Indicators to Spot Bull and Bear Markets 268

Stage Analysis for the Market Averages. The Advance-Decline Line. Measuring the Markets Momentum. Simple but Effective. No Isolationism

Conlenls XI

Here. As GM Goes... Cheap or Dear. Going Against the Crowd.

CHAPTER 9 Odds, Ends, and Profits 310

Fun with Funds. Short-Term Fund Trading. The

Same Game with a Slight Twist. Options: A Very Exciting but Risky Game. Some Real-Life Examples.

Its No Different When Dealing with the Future(s).

CHAPTER 10 Putting ll All Together 336