Stage 2 Stocks in Indian Markets

Stan Weinstein and the Four Stages of a Stock’s Life Cycle

Stan Weinstein published Secrets for Profiting in Bull and Bear Markets in 1988. The book introduced a framework that has endured decades of market evolution precisely because it describes a behavioural reality rather than a mathematical abstraction: stocks move through four repeating stages, each with a distinct price, volume, and moving average character. Understanding which stage a stock is in determines whether the buyer, the seller, or neither has the structural edge.

The insight that makes this framework commercially valuable is not the existence of these stages — any experienced trader recognises that stocks trend up, top out, and trend down. The insight is the identification of where most retail traders enter and exit relative to these stages. Most retail traders buy in Stage 1, hoping for a breakout that may not come for months or years, or that may never come at all. Many more buy in Stage 3, attracted by the headline stories and analyst upgrades that tend to peak at distribution. Both entry points carry asymmetric risk against the buyer.

Stage 2 is the phase where the trend has already been established, institutions have already committed capital, and the path of least resistance is upward. Entering here means trading with institutional momentum rather than anticipating it. The Finmagine Trader Stage 2 screener translates Weinstein’s definition into seven precise, testable conditions that can be evaluated objectively for every NSE-listed stock every trading day.

The Seven Rules Decoded — How the Scanner Identifies Stage 2

Weinstein’s Stage 2 definition is qualitative — a rising trend with moving averages in proper alignment. The Finmagine Trader screener translates that qualitative definition into seven binary conditions that every stock must pass simultaneously. If a stock fails even a single condition, it does not appear. No exceptions, no partial credit.

Here is the complete logic in one place — every line of the scanner query broken down, so you can understand exactly what it is checking and why it matters:

The conditions fall into four logical groups: Trend (is the long-term direction up?), Structure (are the moving averages properly stacked?), Momentum (is the short-term energy confirming the long-term trend?), and Liquidity (can you actually trade this stock?). Walk through each Logic Block below and the scanner will no longer feel like a black box.

Logic Block 1 — The Trend Foundation

An SMA (Simple Moving Average) is just a smoothed version of a stock’s price history. The 150-day SMA is the average closing price over the last 150 trading days — roughly 7 calendar months. The 200-day SMA covers 200 days — roughly 10 months.

The 200-day SMA is the most widely watched trend line on the planet. Institutions, fund managers, and algorithmic trading systems globally use it as the primary dividing line between bull and bear territory. A stock above its 200-day is, by the most widely used institutional definition, in a long-term uptrend. This is the “Institutional Border.”

By requiring price to be above both the 150 and 200-day averages, the scanner immediately eliminates all Stage 4 downtrends, all stocks still forming a base in Stage 1, and all short-term rallies within long-term declines. No bottom-fishing. No catching falling knives. Only confirmed long-term uptrends.

Logic Block 2 — The Alignment

This condition is not about price — it is about the averages themselves. When the 150-day SMA sits above the 200-day SMA, the recent period is outperforming the longer lookback. The trajectory is upward and accelerating.

If the 150-day were below the 200-day, it would signal that the recent trend is weaker than the longer-term one. Even if price was momentarily above the 200-day, the trend structure would be deteriorating. This condition ensures the moving averages are stacked in the correct order — the prerequisite for a genuinely healthy and strengthening uptrend, not one that is already topping out.

Logic Block 3 — The Secret Sauce (Rising 200 SMA)

This is the single most important condition in the entire scanner. It eliminates the largest category of false signals. Here is the problem it solves:

A stock can be above its 200-day SMA even when the 200-day is flat or declining. Imagine a stock that crashed from ₹500 to ₹200, then bounced to ₹240 and is now sitting just above its still-declining 200-day average. A basic screener would flag this as bullish. This scanner rejects it — because the 200-day SMA itself is still pointing downward.

A flat 200-day SMA is a sleeping stock. A rising 200-day is a waking stock. By checking the 200-day against historical values from roughly one month ago, four months ago, and five months ago, the scanner confirms a genuine long-term uptrend — not a temporary recovery blip within a sustained downtrend. This single condition is what separates a true Stage 2 institutional markup from a dead-cat bounce in a Stage 4 collapse.

Logic Block 4 — Momentum Acceleration

The 50-day SMA sitting above the 150-day means the most recent 2 months of trading are stronger than the medium-term 7-month average — the stock is accelerating, not decelerating. Short-term momentum is outrunning the medium-term trend.

Then there is the final confirmation: today’s price must be above even the 50-day average. The price is riding on top of the trend, not lagging below it. This rules out stocks that are technically in Stage 2 on the longer timeframes but are currently mid-pullback.

The combined visual effect of all four conditions so far is what traders call the “fan” alignment: from the bottom of the chart, you have the 200-day SMA, then the 150-day above it, then the 50-day above that, then the daily price riding on top of all of them — a perfectly stacked hierarchy of strength, each layer confirming the one above it.

Logic Block 5 — Range and Structure

This creates the Goldilocks Zone within the annual price range. Two sub-conditions work together:

The floor (50% above the annual low): If a stock’s lowest price in the past year was ₹100, the scanner requires it to be trading at ₹150 or higher. This eliminates bottom-fishers — stocks that are barely waking up from the floor with unproven upside. The first 50% of the move off an annual low is the riskiest phase, prone to false starts and reversals. Stocks that have already cleared this level have demonstrated real institutional conviction. The train has left the station and proven it has power.

The ceiling (within 25% of the annual high): If the 52-week high is ₹200, the stock must be at ₹150 or higher. This creates the upper zone. Combined with the lower floor, the stock must sit in the upper quarter of its annual trading range — proven strength, not bottom-fishing, and close enough to its highs to be in active markup territory approaching potential breakout.

Logic Block 6 — The Liquidity Gate

The NSE lists thousands of stocks. Many technically satisfy all the Stage 2 trend conditions above but trade only a few hundred or thousand shares each day. If the total daily trading value of a stock is ₹2 lakh and you want to build a ₹1 lakh position, you are instantly consuming 50% of the day’s volume. Your buy order moves the price against you on entry. And when you want to exit, there may not be enough buyers to absorb your shares without driving the price down sharply.

The ₹10 lakh filter ensures that every stock in the Stage 2 results has enough real daily liquidity that a realistic position can be built and unwound without distorting the market. It filters out illiquid micro-caps where Stage 2 conditions may technically be met but where real-world execution is practically impossible.

Two additional safety conditions complete the filter: the closing price must be above ₹10 (eliminating penny stocks prone to manipulation and extreme volatility), and daily volume must be greater than zero (confirming the stock actually traded today, ruling out suspended or halted securities).

The Complete Stage 2 Checklist

In the table below, every condition is listed with its plain-English meaning, what it checks, and why it is in the scanner.

#	Condition	What It Checks	Why It Matters
1	Close > SMA(150)	Daily closing price above the 150-day simple moving average	Confirms basic medium-term uptrend; price is above the intermediate average that represents roughly 7 months of trading
2	Close > SMA(200)	Daily closing price above the 200-day simple moving average	The golden cross zone; the 200-day is the most widely monitored trend line by institutional traders globally
3	SMA(150) > SMA(200)	The 150-day SMA is above the 200-day SMA	Moving average alignment confirmed; the faster average is above the slower average, indicating sustained medium-term strength exceeding long-term baseline
4	SMA(200) Rising	The 200-day SMA value today is higher than its value 20, 80, and 100 trading days ago	The single most important condition. The 200-day SMA itself must be trending upward — not flat or sideways. Checked at three historical points to confirm a genuine trend rather than a brief uptick
5	SMA(50) > SMA(150)	The 50-day SMA is above the 150-day SMA	The shortest measured SMA is above the medium-term average; short-term momentum is stronger than the medium-term trend, confirming acceleration rather than deceleration
6	Close > SMA(50)	Daily closing price above the 50-day simple moving average	Price is above even the shortest measured average; confirms there is no short-term pullback that has broken the near-term uptrend
7	Price in 52W Range	Weekly low ≥ 52-week low × 1.5 and weekly high ≥ 52-week high × 0.75	Confirms the stock is trading in a meaningful position within its annual range — not so far from its 52-week low that it has already made a full extended move, and close enough to its 52-week high to be in active markup territory

In addition to the seven SMA conditions, the screener applies a liquidity filter: the product of the daily closing price and the 50-day average volume must exceed ₹10,00,000 (ten lakh rupees). This eliminates thinly traded stocks where even a modest position size would move the market, making the screener results practical for real trading rather than theoretical.

Why It Works — Real Stocks, Real Returns

The Stage 2 framework is not a backtested theoretical model. These are real NSE-listed stocks that followed the three-step momentum pattern — a dip below the 200-day average, a powerful rocket recovery back above it, and a breakout into all-time high territory — and the results speak for themselves.

The VBL trade — +566% over four years — illustrates the power of letting momentum run. The initial risk on entry was roughly 15% (the distance from entry down to the 200-day EMA). The ultimate reward was 566%. That is a risk-to-reward ratio of approximately 1:40. Momentum trading is not about being right on every trade. It is about cutting losers quickly and letting winners run until the trend genuinely breaks.

Stage 2 vs a Rising Stock — What Stage 2 Is NOT

A common misconception is that any stock moving upward is in Stage 2. The stage analysis framework is more specific than that, and the distinction matters because stocks that superficially look bullish can still carry the structural characteristics of Stage 3 distribution or Stage 4 decline.

A stock can be up 20% over the past week and still NOT be in Stage 2 if that 20% move is a short-term relief rally within a Stage 4 downtrend. The SMAs are still declining, the 200-day is still pointing down, and the alignment is still broken. The rally does not change the structural stage — it merely creates a tradeable counter-trend bounce, which carries a fundamentally different risk profile.

A stock can be above its 200-day SMA and still NOT be in Stage 2 if the 200-day SMA itself is flat or beginning to decline. A stock bouncing above a flat 200-day SMA may be in the early stages of an attempted Stage 1-to-Stage-2 transition, or it may be in the late stages of Stage 3 distribution where price is still nominally above the 200-day but the trend is deteriorating. Without a rising 200-day, Stage 2 is not confirmed.

The practical implication of this distinction is significant: a trader who uses “above the 200-day SMA” as a proxy for Stage 2 will have a watchlist roughly four to five times larger than the Finmagine Trader Stage 2 tab, and a meaningfully higher proportion of stocks in late-stage distribution or early decline. The seven-condition scan is more conservative precisely because the false positive rate of the single-condition approach is too high for practical trading.

Stage 2 in Indian Markets — Key Observations

Applying Weinstein’s framework to the NSE universe produces some patterns that are consistent with international markets and some that are distinctly Indian. Understanding these patterns makes the Stage 2 tab more useful than treating it as a simple filter output.

The Stage 2 universe on the NSE typically contains 100–200 stocks on a healthy trading day. This range reflects a bull phase where multiple sectors are participating in an institutional markup. When the count falls below approximately 80 stocks, it is a meaningful signal that market health is deteriorating — fewer sectors are sustaining institutional buying, and the breadth of the uptrend is narrowing. A Stage 2 count below 80 is a prompt to reduce position sizing, tighten stops on existing positions, and avoid initiating new momentum trades. When the count rises above 200 stocks, it typically indicates a mature bull phase where many stocks have been in uptrend for an extended period — late-cycle conditions where risk management becomes more important than finding new entries, and where tightening stops is more rational than adding new positions.

The liquidity filter (₹10 lakh minimum daily turnover) is particularly important in Indian markets because the NSE lists thousands of stocks across a wide range of market capitalizations and trading activity levels. Without a liquidity filter, a Stage 2 screener for Indian markets would return many technically compliant stocks that trade a few thousand shares per day — stocks where a position of even ₹50,000 would constitute a meaningful percentage of daily volume and move the price on entry and exit. The ₹10 lakh filter ensures that every stock appearing in the Stage 2 tab can accommodate a practical trading position without significant slippage.

BSE-only stocks are excluded from the screener. The screener draws on NSE data, and stocks that are listed only on the Bombay Stock Exchange without an NSE listing are not covered. In practice, this affects a relatively small number of stocks — the vast majority of actively traded Indian equities are dual-listed.

Stage 2 + Near High — The Swing Trader’s Tab

The Stage 2 tab returns approximately 153 stocks on a typical day — a substantial universe for research, but still requiring significant work to identify the highest-priority candidates. The Stage 2 + Near High tab applies a second filter to that universe: among all Stage 2 stocks, which ones are simultaneously trading near their 52-week high?

Near 52-week high in the Finmagine Trader context means the stock is within a tight range of its 52-week high. At this price level, every investor who has held the stock for the past year is sitting on a profit. There are no trapped sellers — no investors waiting for the stock to return to their entry point so they can break even and exit. The stock is in price discovery territory, and the supply overhang that typically caps rallies at prior resistance levels does not exist. This absence of overhead supply is the structural reason why near-high stocks often continue higher rather than stalling.

Combining Stage 2 (confirmed institutional uptrend) with Near 52-Week High (no overhead supply) creates a setup where the trend is confirmed, the structural resistance is absent, and price is at its strongest recent position. The resulting list is approximately 36 stocks — a highly practical number for swing trading research.

The Stage 2 + Near High tab is purpose-built for swing trades of 2–10 days and positional trades of 2–8 weeks. The confirmed uptrend means the path of least resistance is up. The near-high position means there is no overhead resistance to work through. These are the stocks where a catalyst — earnings beat, sector news, broad market strength — has the least friction in translating into continued price appreciation.

The Execution Workflow — From Scanner to Trade in Under 60 Seconds

The scanner does the heavy lifting. But a result on a screen is not a trade. There is a three-step workflow that converts the raw Stage 2 list into a focused, actionable shortlist — and the whole process takes less than 60 seconds on a typical morning.

Risk Management — The Part That Keeps You in the Game

The most sophisticated scanner in the world is useless if you cannot survive the inevitable losing trades. Even the best momentum setups fail. The market does irrational things. What separates professionals from retail traders is not the ability to pick winners — it is the discipline to cut losers before they destroy the portfolio.

Why 200-day Moving Average for the Exit?

The scanner uses the 200-day Simple Moving Average (SMA) to identify Stage 2 stocks. For the exit, many traders prefer the 200-day Exponential Moving Average (EMA). The EMA is mathematically weighted to respond more quickly to recent price data, giving a slightly earlier warning when a trend reverses. Whether you use the SMA or EMA, the principle is identical: when the dominant long-term trend line is broken, the trade is over.

Position Sizing — The Formula That Removes Emotion

Before every trade, calculate the maximum loss you are willing to accept on that position. Then determine your risk per share — the distance from your planned entry price down to the 200-day average (your stop level). Divide the first by the second:

This formula removes all emotion from sizing. It does not matter how excited you are about the setup, how many times you have seen this pattern, or how confident the chart looks. The formula tells you exactly how many shares to buy. No more, no less.

Hold 7 to 10 Momentum Trades Simultaneously

A single momentum trade, however well-researched, can fail. The strategy works in aggregate — across a diversified portfolio of 7 to 10 simultaneous Stage 2 positions. If one hits the 200-day stop and closes at a 15% loss, three or four others may be up 30%, 50%, or 100%. The math is asymmetric. The risk on any individual trade is 10–20%. The reward, for stocks that stay in Stage 2 for months or years, is effectively unlimited.

This is the venture capital model applied to public markets: take many calculated asymmetric bets, cut the losers fast, and let the winners compound.

Warning Signs — When a Stage 2 Stock Is Exiting Stage 2

Stage 2 does not last indefinitely. Every stock that enters Stage 2 will eventually transition to Stage 3 distribution as institutional selling begins to offset buying pressure. Recognising the early warning signs of a Stage 2-to-Stage-3 transition is as important as identifying stocks entering Stage 2 in the first place.

The visible warning signs on the price chart include: price making new highs on declining volume, a classic distribution pattern where the stock continues to advance but on progressively weaker institutional participation; price pulling below the SMA(50) for the first time in months, breaking the near-term support that has held throughout the Stage 2 phase; and the SMA(150) beginning to flatten and converge toward the SMA(200), the first indication that the medium-term trend is decelerating.

These are chart-based warning signs that any trader can observe manually on TradingView. But there is a systematic advantage built into the Finmagine Trader workflow: when a stock’s SMA conditions deteriorate sufficiently, it automatically disappears from the Stage 2 tab. The screener passively monitors every Stage 2 stock in the background. A trader who notes each day which stocks from their watchlist are still appearing in Stage 2 — and which have quietly dropped off the list — has a systematic exit signal without needing to manually check each holding’s SMA conditions.

The key advantage of systematic screener-based monitoring over manual chart watching is consistency. A trader who manually checks 15 stocks in their watchlist every morning will miss signals on the days they are busy, skip the analysis on low-conviction days, and apply different standards to different stocks depending on their emotional attachment to the position. The Stage 2 screener applies the same seven conditions to every stock every day with no exceptions and no emotional overlay.

Building Your Stage 2 Research Process

The Stage 2 tab is most powerful when it is used as part of a structured daily process rather than consulted sporadically. The following four-step process integrates Stage 2 analysis into a morning workflow that takes under 10 minutes and systematically covers market health assessment, sector observation, candidate identification, and chart-based shortlisting.

This process requires Finmagine Trader to be open for less than 10 minutes. The screener handles the first-pass filtering across all 2,000+ NSE stocks automatically. The trader’s time is spent on the 36 highest-quality candidates, not on manually constructing lists from scratch. The combination of systematic filtering and focused chart analysis is what distinguishes professional-grade momentum research from ad hoc scanning.

Over time, tracking the Stage 2 count daily builds an intuition for market phases that is difficult to acquire any other way. A trader who has watched the Stage 2 count move from 180 to 220 during a strong bull phase, then contract to 60 during a correction, then recover to 150 at the start of the next upleg, develops a felt sense of market breadth that no single indicator can substitute for. The Stage 2 tab is both a daily research tool and a long-term market education system.

Bhav Bhagwan Che — Price Is King

Bhav Bhagwan Che — an old Gujarati market saying that translates to “Price is God” or “Price is King.” It is the absolute mantra of the momentum trader. What it really means is this: stop arguing with the market. Stop sitting there saying a stock is too expensive, or that it should not be going up because its PE ratio is high or its earnings were disappointing. If the price is going up, it is right. Period. The price is the only actual truth on your screen. Everything else is just a narrative.

The Stage 2 scanner is not magic. It is logic. Seven precise, testable conditions that mathematically verify a stock is in the institutional markup phase — the phase where the largest and most informed players in the market have committed capital to an advancing trend. The scanner removes opinion. It removes emotion. It forces alignment with what is actually happening in the market, not with what you think should be happening.

Open your portfolio right now. Look at your holdings. How many of them are in Stage 2? How many are true institutional uptrends actively approaching all-time highs? And how many are Stage 4 falling knives you are stubbornly holding, secretly hoping they will return to your entry price? The Stage 2 tab answers that question in under 10 seconds — for every stock on the NSE simultaneously.