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Stan Weinstein
30-week Moving Average
& Stage Analysis

Stan Weinstein published a fantastic book
which is still often recommended as essential reading
for anyone wanting to learn about technical analysis.

In his book he explains how to avoid participating in bear markets,
by spotting them early and going to cash.

You are here: Technical Analysis > Stan Weinstein 30-week MA & Stage Analysis
 
Related links: Trends; Stop Loss; Support and Resistance; Dow Theory;

Stan Weinstein

Stan Weinstein published one really good text book in 1988, Secrets for Profiting in Bull and Bear Markets, and in it he promoted a number of key strategies and concepts.

Sample weekly chart showing Weinstein's idea about the 30-week SMA.
This chart is explained on the Weekly Analysis web page.

30-week Moving Average (MA)
on a Weekly price chart

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) is 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.

Stage Analysis

Stage Analysis


Stage Analysis
Source: Stan Weinstein, "Secrets for profiting in Bull and Bear Markets" page 32.
 
The coloured ribbon across the bottom of the above chart is Weinstein's Stage Analysis ribbon (as applied in BullCharts charting software).
 
Weinstein said that at any one point in time, a stock (or an index) will be in one of four market "stages":
  • 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 phase), or
  • Stage 4 the Declining Stage.
For more information about Stage Analysis, see Brainy's eBook (PDF) Article ST-6410, "Sample trading strategies - Weinstein" (Toolbox Member password required), and you can refer to Weinstein's book, "Secrets for profiting in Bull and Bear Markets".

Simple MA or Weighted MA?

There is often discussion about whether Stan used a Simple, or a Weighted, Moving Average. Here are some notes with reference to his book.
  1. 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...".
     
  2. 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..."
     
  3. Chart 9-2 from the book.Page 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:
    "To 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...".
Acknowledgement:- The text and table above are from Weinstein's book.
Readers are encouraged to study further details in his book,
"Secrets 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 21-week EMA.
It 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 software available).

Current Analysis

Robert analyses the Australian market on a weekly basis, and includes a weekly update of this type of chart. Toolbox Members can see details and comments in the latest chart in the Toolbox Member's Area.

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Terminology
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Last revised: 7 February, 2013.