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Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets book explains stock market action into different phases that explains price action within cycles of bottoms, breakouts, uptrends, tops, breakdowns and downtrends. Stage 1 Stock Market Bottoms A chart makes a bottom as the market runs out of sellers at lower prices and begins to create a price range and a new sideways base.  Stage 2 Stock Market Uptrends Uptrends begin as investors begin to accumulate positions at low prices until they run out of sellers at lower prices inside the trading range and create a breakout in prices to higher levels. Uptrends make higher highs and higher lows and rotate between ascending price ranges and new breakouts. In uptrends, dips in price action are bought as they are opportunities to enter at lower prices.  Stage 3 Stock Market Tops Tops take time to form on a chart as distribution happens at high price levels. Many times a top has a head and shoulders chart pattern as buyers fail to take prices higher multiple times and the top price level is put in. This happens when a chart runs out of new buyers at higher prices and profit taking takes a chart lower.  Stage 4 Stock Market Downtrends Downtrends begin as fear of loss sets in and investors exit with remaining profits as a chart makes lower highs and lower lows. Trailing stop losses can trigger in cycles taking a chart lower. The best risk/reward ratio for short selling occur early in downtrends or at initial breakdowns to lower prices. Downtrends happen as stocks are distributed and large positions exited. Rallies are sold into as an opportunity to get out at higher prices.  Understanding what phase of the market cycle a chart or the stock market is in can help understand the path of least resistance to trade with.

Moving Average Answer Key: Moving averages allow traders the ability to quantify trends and act as signals for entries, exits, and trailing stops. They can become support and resistance, and give the trader levels to trade around. Below are examples of the specific moving averages with time frames. • 5 Day EMA: Measures the short term time frame. This is support in the strongest up trends. This line can only be used in low volatility trends. • 10 day EMA: “The 10 day exponential moving average (EMA) is my favorite indicator to determine the major trend. I call this ‘red light, green light’ because it is imperative in trading to remain on the correct side of a moving average to give yourself the best probability of success. When you are trading above the 10 day, you have the green light, and you should be thinking buy. Conversely, trading below the average is a red light. The market is in a negative mode, and you should be thinking sell.” – Marty Schwartz • 20 day EMA: This is the intermediate term moving average. It is generally the last line of support in a volatile up trend. • 50 day SMA: This is the line that strong leading stocks typically pull back to. This is usually the support level for strong up trends. Use 50-Day Average For Trading Signals • 100 day SMA: This is the line that provides the support between the 50 day and the 200 day. If it does not hold as support, the 200 day generally is the next stop. • 200 day SMA: “My metric for everything I look at is the 200-day moving average of closing prices. I've seen too many things go to zero, stocks and commodities. The whole trick in investing is: “How do I keep from losing everything?” If you use the 200-day moving average rule, then you get out. You play defense, and you get out.” - Paul Tudor Jones Bulls like to buy dips when price is above the 200-day moving average, while bears sell rallies short below it. Bears usually win and sell into rallies below this line as the 200 day becomes resistance, and bulls buy into deep pullbacks to the 200 day when the price is above it. This line is one of the biggest signals in the market telling you which side to be on. Bull above, Bear below. Bad things happen to stocks and markets when this line is lost.