- The four stages, how each is identified, and what to do in each
- How stage analysis maps onto the Wyckoff cycle
- Why the 30-week moving average and its slope do most of the work
Stan Weinstein's contribution was practical rather than theoretical: he reduced the whole Wyckoff cycle to four states identifiable at a glance on a weekly chart, using one moving average. It is the most usable framework in this module, and it is what the Chart DNA engine on this site computes for every stock.
╭─╮ STAGE 3
╱╲ ╭╯ ╰╮ topping
STAGE 2 ╱ ╲╱ ╰╮
advance ╱ ╰╮ STAGE 4
╱ ╲ declining
╱ ╲
┌──────────╱ ╲
│ STAGE 1 ╱ ← breakout ╲
│ base ╱ ╲──╮
╲ │~~~~~~~╱ ╰~~
╲ │
╲│ 30-week MA: flat → RISING → flattens → FALLING
Stage 1: basing MA flat, price crossing it
Stage 2: advancing MA rising, price above
Stage 3: topping MA flattening, price choppy
Stage 4: declining MA falling, price below The four stages
- 1 — BaseHow to identify it: 30-week MA flat; price oscillating around it; volume quietWyckoff equivalent: AccumulationWhat it's for: Watching and preparing. Building a list.
- 2 — AdvanceHow to identify it: Price above a rising 30-week MA; higher highs and lowsWyckoff equivalent: MarkupWhat it's for: Where nearly all long-side money is made
- 3 — TopHow to identify it: MA flattens; price chops across it; rallies fail to extendWyckoff equivalent: DistributionWhat it's for: Reducing. Not adding.
- 4 — DeclineHow to identify it: Price below a falling 30-week MA; lower highs and lowsWyckoff equivalent: MarkdownWhat it's for: Absence. Nothing to do on the long side.
The most valuable use of stage analysis is subtractive: it tells you what not to do. No long positions in stage 4, however cheap. No new buying in stage 3, however good the story. That alone removes a large share of avoidable losses.
Why 30 weeks?
Thirty weeks is roughly the 150-day moving average — long enough to filter out most noise, short enough to turn within a few months of a genuine change in trend. There is nothing sacred about the number, and 40-week (200-day) works comparably. What matters is that it is long enough that its slope means something.
- Price above the MA tells you the medium-term balance favours demand.
- Slope of the MA tells you whether that balance is improving or decaying. A price above a falling MA is a stage 4 rally, not a stage 2 advance — a distinction that saves a great deal of money.
- Distance from the MA measures extension. Far above it means a pullback is likely and a new entry is poorly placed, however strong the stage.
- Time in stage is context. A stock four weeks into stage 2 and one three years into it are in the same state with very different amounts of cause remaining.
The classic Weinstein setup — a stage 1 to stage 2 transition, which is exactly a Wyckoff SOS on a weekly chart.
- Prior decline
- stage 4, 14 months
- Stage 1 base
- 31 weeksMA flattens
- 30-week MA
- turns up in week 27
- Breakout above base high
- on 3.4× average weekly volume
- Relative strength vs index
- turns positive 5 weeks before the break
Relative strength: the fifth condition
A stock in stage 2 while the index is also advancing is unremarkable. A stock entering stage 2 while the index is flat or falling is a genuinely different observation: demand is arriving in spite of the environment rather than because of it.
This is why the relative strength line — the stock's price divided by the index — belongs on every weekly chart, and why our DNA engine tracks whether it is improving, flat or deteriorating alongside the stage itself. The relative strength lesson covers the mechanics.
The strongest emotional pull in the entire framework is buying a good company in stage 4 because it is 60% off its high. The chart is telling you something specific and unwelcome: a persistent seller is present, and the medium-term balance favours supply.
Falling knives are not a category of opportunity; they are a category of ongoing distribution. Wait for stage 1. A stock that bases for six months and then turns up costs you a fraction of the top and removes most of the risk — and if it never bases, you were right to have waited.
This applies with particular force when the fundamentals look attractive. A cheap valuation and a stage 4 chart together frequently mean the market knows something that hasn't reached the reported numbers yet — the value trap lesson is the same idea from the other direction.
The Nifty peaked around 26,277 intraday on 27 September 2024, having advanced for most of the preceding two years. Over the following six months it fell to roughly 21,750 by early April 2025 — a decline of about 17%.
The framework does not require you to have predicted the top. It requires you to notice a specific sequence: rallies that stopped extending, the weekly moving average flattening and then rolling over, and price spending time below it. That sequence is the stage 3 to stage 4 transition, and it took months rather than days.
- ☐Open the weekly chart with a 30-week moving average.
- ☐Is price above or below it?
- ☐Is the MA rising, flat, or falling? Judge the slope over the last ten weeks.
- ☐Name the stage. If you can't, it's a stage 1 or 3 transition — which is itself the answer.
- ☐How many weeks has it been in this stage?
- ☐How far is price from the MA in percentage terms — extended, or reasonable?
- ☐Is relative strength versus the index improving or deteriorating?
See it live · Every Chart DNA page states the stage, weeks in stage, the 30-week MA and its ten-week slope, price versus that MA, relative-strength trend, and the full history of previous stage transitions.
Stage any stock →In one screen
- 1Four stages: base, advance, top, decline — identified by price versus a 30-week MA and that MA's slope.
- 2Stage 2 is where long-side money is made; stage 4 is where capital is lost.
- 3The stage 1 to stage 2 transition is the Wyckoff SOS seen on a weekly chart.
- 4Relative strength versus the index is the fifth condition and separates good stage 2s from ordinary ones.
- 5The framework's greatest value is subtractive — it tells you what not to buy.
Check yourself
Nothing is scored or stored — the explanation after each answer is the point.
A stock is trading above its 30-week moving average, but that average has been declining for eight months. Which stage is this?
Why does stage analysis say to avoid a fundamentally cheap stock in stage 4?