As the stock advances from stage-1 to stage-2, price breaks out above its 30-week moving average (MA) on impressive volumes. The 30-week MA starts turning up shortly after the breakout, & the price stays above the 30-week MA.
The 3 moving averages
In his book “Trade Like a Stock Market Wizard”, Mark Minervini further improved this by adding that the 10-week MA should be above the 30-week & 40-week moving averages, & the 40-week MA should be rising for at least a month.
On my weekly charts, I just display the 10-week & 30-week moving averages, & prefer the 30-week MA also to be rising for at least a month. Obviously, the 40-week MA should also be in its place.
Entry
The ideal scenario is to buy stocks when they are coming out of the first stage into the second stage & beginning to move higher. The majority of gains that a stock will make is while it is in a stage-2 uptrend.
Exit
When your stock is in any stage other than stage-2, you are either losing money or losing time. So, before you initiate a position in any stock, make sure that your stock be in stage-2. Keep this non-negotiable, & with proper risk management, you'll be successful.
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