[isatrader]

1) I've heard to stay away from stocks that are too "thinly traded"... that seems like a fairly subjective term. Did Stan have an opinion/definition on what this meant? Would also love too hear others thoughts on what their threshold is...

Can't remember off the top of my head if this has been mentioned by Stan in the book or any of the interviews. So I will just give you my opinion on the subject, which is that I've traded a number of thinly traded stocks over the years, as it's particularly common with a large amount of UK stocks which I trade as the market is quite small and a lot of the volume is in the FTSE 100 stocks. Lack of liquidity in a stock can cause very volatile price movements in both directions, which can cause you to be stopped out for no reason intraday or on the open even and then the price snaps back again within a few minutes, and you can get very large bid ask spreads which you don't want, as you want the spread to be as tight as possible. So these days I impose a limit on my trades of a maximum bid ask spread size of 0.5%. If it's anymore than that then I won't consider it as in some thinly traded stocks you can have spreads that are 4 or 5%, so you are immediately 5% down when you open the trade on top of the broker fees, so these are some of my reasons for avoiding them.

2) In doing some research, I've found a few charts where the stock appears to be entering a Stage 2a, however when I check the stock's P&F chart and look at the preliminary price target it turns out to be bearish... What does this mean? I'm assuming their are conflicting indicators and I should not touch with a ten foot pole.

I'm assuming that you are looking at point and figure chart of a stock with a single digit price and using the traditional scaling method. This will not have much movement as each box will have a very high percentage in the single digits, and it requires a 3 box reversal on the traditional scale. So a huge move is required to add an additional X to the column in the single digits, and so I'd suggest using percentage based scaling on charts with very low values especially, or they'll be looking back to much higher swing highs in order to give a breakout signal, and hence why it's still on a bear signal.

Basically with the traditional scaling method and a low value chart, the P&F breakout signal will come only after a much bigger move, and so the Stage 2A breakout that you are seeing might be quite an early one, which are not always as strong as breakouts from a much more developed Stage 1 base. But I'd suggest learning much more about using point and figure charts before implementing them with your live trades, as they are great, but you need to understand how to read them correctly.

A few of the best books on the subject are The Definitive Guide to Point and Figure by Jeremy du Plessis, which focuses on the price action aspect of them mostly and Point and Figure Charting by Tom Dorsey which focuses on the relative strength and market breadth uses which overlap with Weinstein's method in many ways.