I would go back to square one. I wouldn't say anything at first or even use the hand signal. Just put her in a sit (or down) and wait a second or two. Click and treat. Do that a few times till she understands that not moving is what is getting the treats. Then add the hand signal.
Gradually (very gradually) increase the time. Remember to vary the time so that she doesn't anticipate how long she has to stay. Start with a second or two and then build to five or six seconds and then do two, then five, then three and so on, gradually building up to a lengthy stay. Always vary the length of time.
Once she's solid with the hand signal, add the word again. You might actually want to use a different word if she's confused by "stay". Try something like "wait" or really any other word.
After she begins to understand what it is, then you can start to add the other variables like distance and distraction. Whenever you add another variable, always go back to a short duration. We start with a simple movement of your arm as distraction. A movement of your foot is the beginning of distance.
Slow is the key. She's very young and probably doesn't have a lot of impulse control yet. The more you set her up to succeed the stronger a stay you will create. For every time she breaks the stay before you release her, it will take several times of doing it right to reinforce the behavior.
I would never force her into a stay (by holding the leash tight). It doesn't allow her little mind to figure out what you want. That's just me though!
