Trading Education

Wyckoff, Weinstein & Stages - Specific Examples & Illustrations

Introduction

I will get into some specific ideas this weekend, but first I want to go over some recent, specific examples and education.

Recent feedback says to me that people want specific entries and actionable ideas, which I certainly appreciate. We all want to make money now. When should I enter? How and when should I exit?

These are important questions. Keep in mind that one of my primary goals here in starting my service and the Substack was to educate and empower traders. There is no way I can have the time to look at every great idea in detail.

If I can provide you the right guidance to see for yourself what I see, this is far more valuable to you than just giving you an entry. You will be able to spot these ideas on your own and will have more confidence entering the prime setups with size, proper timing… and potentially leverage if warranted.

I have a great system which allows me to look at where prospective trade and investment ideas are within the stages and to evaluate them technically and fundamentally for the best. I look at ~25 criteria total technically/fundamentally for hundreds of stocks each week.

That initial work is already done for you, although you may want to dig in and verify my work if committing significant capital to an idea. From the filtered list which follows, more time is given to the best candidates.

While I am glad to give specific entries, exits, sometimes a given trade idea will take weeks, months to set up precisely. They often fall off my radar.

The best of my ideas have exceptional potential technically and fundamentally, based on the 25 criteria. They are stocks which can give months to years of upside, the type of stocks which smart money may like accumulating over time for a large markup. If we are too focused on catching 20% today, we may miss what can run up 200-1000% plus over a year or two.

I still highly recommend your further study of Wyckoff and Weinstein to better identify what I’m sharing, as well as a tool such as Tradeguider Wyckoff VSA for training you visually to spot these. In the following examples, I will use charts with familiar standard technical indicators to help you see what I will note.

Recent Trade Setups into Stage 2 Markup - Examples

My MFB entries (the crosshairs in circle) are designed to pinpoint the initial move from accumulation to markup. There will sometimes be false, early signals, but there is a distinct reason for the early MFB entry. When they pinpoint that move, often the stock will be up 30-50% coming out of accumulation before it shows in scans as a Stage 2, week 1 markup.

If I can be in as the initial move triggers, I can have a much better cost basis. If the entry is correct, the stock will likely never violate the entry for months or years, because smart money has fully accumulated below and is ready to initiate a large markup (Stage 2).

The three Stage 2 - week 1 markups below are already up massively and will require a new technical setup on a pullback for clean low risk entries. (Those entries would be more of a Mark Minervini type pullback or VCP entry of Stage 2 breakouts already showing a confirmed markup).

One of my primary concerns for many traders now is that they are trying to enter trades in confirmed markdowns, many of the familiar names. These stocks may give big bounces in a bear rally. However, they are a long way from quality accumulations into markup and confirmed uptrends, perhaps a year or more.

If they don’t have the proper financial characteristics, metrics, earnings growth, etc. they are likely to never be accumulated by smart money in a bear market and could even go out of business in a few years. Great technicals come from strong smart money activity and they need strong reasons for holding long-term positions. Buying finacially weak companies may be very painful with a BTD Woods approach.

$CWCO

For CWCO, we have a great example. In the large circle at the beginning of the chart we are in markdown (Stage 4). We can see large hammer candles/bars as we see in many stocks, even indices today. There is some smart money buying driving these moves, as indicated by closes well off the lows.

However, in Stage 4, these are usually traps for retail. We can see that if we are buying in the $13-14 range off this, we are only now two years later seeing signs of potential trending move from there with upside. This is why we don’t want to do anything more than take quick long trades in confirmed markdown stocks. In fact, had we held, we had to ride it down another 30-35% before the around 18 months accumulation indicated by the large rectangle.

The bulk of smart money activity in this time period is occurring slowly over time into retail selling below $10.50 area. We can see clearly that they have supported price under $9.50. In October of 2020, we have a no demand (ND, small circle). This took us down to our initial smart money support level below in the accumulation, before an early attempt by retail to rally the stock. Smart money is still active selling into this up move.

We want to remember this no demand. In February, 2022, we make a lower price low in the $9s just below the prospective support from October 2020 around $9.60. Within weeks (in March, circled), we have a higher price low, with a higher low on the MFI. Very astute traders have picked up on the activity here and are following smart money into the stock.

The initial two-week rally attempt fails, and the stock does a measured pullback on light volume to the no demand level from October 2020 precisely, $10.66 (final circle). Here we have very clear signs in our standard indicators that the rally is very likely to begin based the MFB signals below (VSA confirms):

Pullback, bounce weekly 50 RSI; a precise, clean (no spike below) weekly candle open at the closing price of the October 2020 no demand; MACD breakout at 0; MFI much higher low; slow stochastic 50 bounce, crossover; ROC breakout over 0 which had pulled back from the two-week rally, made higher low, breaks out.

Not every breakout will give all these indicator signals so cleanly and perfectly in sync. When they do, you can bet traders will notice it, and jump into the trade with volume… and they did for a 35% move in 3 weeks. This also results in a 9-week/50-week EMA crossover, with breakout off the 30-week EMA, yet another confirmation for traders.

It is now in Stage 2, week 1 confirmed markup. We can see that the MFB entry was ideal. Now, if we want to be in this for a low risk entry, we have to hope for a pullback confirmation of the volatility breakout into Stage 2 markup.

$PLAB

For PLAB, we see many of the same principles in play. Note that buying into the large circle (Stage 4 markdown) would not have worked out well for us. We still had a long Stage 1 accumulation, prior to our current Stage 2 markup breakout.

Again, we see the value of noting the accumulation and precisely identifying where the MFB entry was likely to occur with the stock up 40% on this weeks breakout off the MFB level. It is now in confirmed Stage 2, but again we would need a pullback here for a clean low risk entry in Stage 2.

$NRG

I have included NRG as an alternative example. Again, we have the same principles in play, but with a notable exception. This stock appears to have moved into a Stage 3 distribution and then back into Stage 1 accumulation, with no significant Stage 4 markdown phase.

It may have shown up as a Stage 4 during 2021 for a time, but either way it never reached the levels of the markdown from 2020, instead forming more of a long term ascending bases type setup.

I consider this a sign of strength into current market conditions, with its strong rating for my long term fundamental criteria. This is the type of stock that institutions, smart money may accumulate and hold long-term creating multiple ascending bases, while never really moving into an extreme Stage 4 markdown for years. This I like for long-term plays.

Again, identifying the MFB level clearly and the accumulation there paid well for early entries.

I hope these are helpful. I will be getting into specific trade ideas for the next post. The purpose of this post is so that when I share strong long ideas, you have the ability to look at the ideas and read the potential of the chart for yourself. The above charts can be used as a type of answer key for new ideas I present that you may want to dig into further.

I do understand that some may not be able to afford a subscription or want to pay for one. There is much time put into quality educational posts, so please at least make the time to study carefully and learn from them as a thank you for my efforts. Your reward for that invested time will show up in your trading account.

~ Scott - Black Tiger Trading

Disclaimer: I am not a licensed adviser. Trade ideas, strategies, analysis are shared for educational purposes. Trade involves risk of loss of capital. Accordingly, trade at your own risk.