These include white papers, government data, original reporting, and interviews with industry experts. The opinions of Financial Sense® contributors do not necessarily reflect those of Financial Sense, staff, or parent company, Financial Sense® Wealth Management. Let's examine the stages, identifying the attributes and outlining the types of positions that work best in each market phase. The stage often begins on high volatility but ends on low volatility because apathy and disinterest have taken their toll, dropping the security's volume to cyclical lows.

Even so, tops display similar characteristics that let traders and market timers make informed judgments about the security's direction. Each of these stages generates a variety of trading and investment opportunities that capitalize on current conditions. However, these issues also exhibit greater vulnerability to positive news shocks that reawaken bullish fervor and allow the process of base building to begin all over again.

The middle of Stage 2 often prints a high-volume continuation gap that marks the halfway point of the uptrend. The technical dominoes fall, one after another, while trapped shareholders are forced to capitulate. Disillusionment and loss of faith characterize this uncomfortable period, which can take a long time to work through the system.

Short positions taken early in a downtrend carry higher risk and higher reward than late in the decline. Base breakouts often trigger big gaps on high volume that stay unfilled for a long time, forcing longs to enter positions within a high consolidation pattern rather than a pullback that tests new support. A brief education on Weinstein's principle lowers the risk associated with this myopia, enabling traders to make informed decisions when markets turn against their positions, as they do during ranges, correctionsand downtrends. Registered Representatives associated with this site may only discuss or transact securities business with residents of states they are registered in.

This happens because market insiders take notice of the developing uptrend and use their special skills to shake out weak hands and late adaptors. Stan Weinstein's stage analysis offers market participants a powerful tool to identify current market conditions and to make rapid adjustments to strategies and risk-management practices. Late-stage downtrends can turn into wars of attrition, with participants moving on to other opportunities.