Monday, February 21, 2011

Stage Analysis

Every rally (from its start to end) consist of four stock market stages. These stages tell you if you should be buying, selling or stay in cash.

Stock stops falling, finds support, goes in range.
Smart money begins small purchases

Prices move up. Sometimes with big uphrusts.
Smart money gets fully invested, while public becomes aware.
In Stage 2, stocks will move up, then develop a base, move up again.
We have multiple bases in a stage 2 run up.
Buy stocks starting a STAGE 2 move.
Due to Multiple Bases, there are many entry opportunities.

Stage 3. TOP ( EUPHORIA )
Prices start flying all over. There is a sense that this time ‘it is different’ –prices will go up forever.
Smart money is selling, while public finally enters the market.

Stage 4. DECLINE ( FEAR )
After making a top, prices start falling.
Public thinks it is a correction, waits.
Finally, prices fall big time, public is filled with fear. They sell when the market is near its final low.


mas said...

Sir, in which stage are we ???

Sasi Uppuluri said...

Sir, "Smart money will be buying when everybody is selling, and smart money will be selling when people get very bullish" - Why does this happen? What is the Psychology behind this?