Create an Account

Its Free and always will be!

Sign up or login with your social accounts

Chart Pattern: How to Spot a Bullish Base-on-Base?

With the stock market turning volatile this year, many stocks have formed base-on-base patterns. Keep an eye out for those, because they tend to be strong chart formations. The base-on-base is, of course, a combination of two bases. The stock forms a base but does not rise much in price from the buy point. That’s often because the general market comes under selling.

So, a new base starts taking shape at a higher elevation than the first. On a chart, the two patterns resemble the profile of two stair steps. Sometimes, the breakout from the second base will come after the selling pressure in the market has lifted.

Here are five characteristics to help identify the pattern:

  • The two bases can be of any proper type: cup-with-handle, flat basedouble bottom, cup-without-handle. Usually, though, the second pattern is a flat base.

  • The second base should not encroach much into the price levels of the first. Any base that sinks much into the first base is not a proper base-on-base formation.

  • The buy point is determined by the second base, whatever that is.

  • When counting bases, a base-on-base formation counts as a single stage.For example, don’t count a cup-with-handle as first stage and a flat base on top of it as a second-stage base.

  • If a stock climbs more than 20% from its buy point before it starts forming the second base, consider the two patterns entirely separate, not a base-on-base.

What do you think? Please This email address is being protected from spambots. You need JavaScript enabled to view it. us any questions or comments.

Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
Rate this blog entry:
What Is Technical Analysis?
Busting the Investing Myth that Penny Stocks Can L...

Popular Investing Books

Peter Lynch
Pranab Uniyal
Mohnish Pabrai
T. Sullivan Brown
Charles D. Ellis
Jeremy Perler

Search Blogs

Most Popular Authors

Top 100 Investment Blogs

 307 Investors Online.

Be a Smart & Well Informed Investor!
Join Today its Free.
Register or Login with just one Click using your Social Account