Question & Answer: Explain in details the concept of Stage Analysis…..

Stage Analysis:

Stage analysis is the methodology of analysis of the movement of stocks for long term trading. The analysis involves comparing the stock prices with the moving average price of the stock. Typically stage analysis can be used for taking buy sell decisions on the stock prices. Volume of trade is also an important factor to consider in addition to the evaluation and stage analysis. There are 4 different stages in the stage analysis

Stage 1: Basing Stage:

Basing stage involves formulation of the stock price base wherein the stock price moves horizontally or sideways, indicating not much of movement of stock price. Typically we can consider 30 months moving average as the bench mark. If the stock is being traded at value which is close to the 30 months moving average it can be considered to be in basing stage

Stage 2: Advancing Stage:

This stage involves upward movement of the stock price by advancing over the 30 months moving average with a consistent movement seen, if the stock is in advancing stage it is expected to move higher over time.

Stage 3 : Consolidation stage:

In this stage the stock price can be seen to be moving sideways indicative of horizontal movement of stock price. In this case even though the stock price might be above 30 days moving average but continuously the gap between the stock price and moving average is seen to be reducing.

Stage 4: Decline stage:

In this stage the stock price can be seen continuously trading below the 30 day moving average with a downward movement. Typically this stage will see the stock prices falling steadily making new lows on monthly basis.

It is advised to buy stocks during stage 2 as these can reap considerable returns over longer term