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
When buying on a pullback, buy as close to the 50day line or 10week line as possible.
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
New product, services, management, price highs
S: supply and demand
I: institutional sponsorships
Big money accounts for 75% of market activity.
M: market direction
3/4 stocks follow the general market trends
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.