Flat base pattern

Flat base is a powerful chat pattern that has a box-like appearance. It usually forms after a breakout from cup and handle pattern or a double bottom pattern. 

In a flat base, the consolidation lets the stock digest prior gains. Stocks can also form flat bases when the overall market is in a downtrend or can’t muster much progress.

A flat base is one of the shorter price patterns. It only needs a minimum of five weeks to take shape. Most other price structures need at least seven weeks.

– Correction in the base should be no more than 15% from the stock’s peak
– Volume on breakout day should be 40% more than average
– Entry price is 10c more than the high of the pattern

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CAN SLIM

C: current earnings 
Earnings growth of at least 25% in recent quarters

A: annual earnings
Earning growth of at least 25% in last 3 years

N: new
New product, services, management, price highs

S: supply and demand

L: leader

I: institutional sponsorships
Big money accounts for 75% of market activity.

M: market direction
3/4 stocks follow the general market trends

Conventional and new wisdom

Conventional wisdom: Buy low, sell high

New wisdom: Buy high, sell higher

– At or near 52 week high
– Leading stocks in leading group
– During a confirmed uptrend
– Be careful when buying stocks $15 or lower. You want to buy right, not buy cheap.

Conventional wisdom: Buy on dips

New wisdom: Buy on the way up

Conventional wisdom: Buy and hold

New wisdom: Hold a leader for the run, then sell.

– A leader’s average run lasts for 12-18 months.