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IBD Meetup

IBD Meetup. Chart School and Pattern Recognition, Module-4 Base Counting. Chart School and Pattern Recognition. Base Counting The reason we count bases is to help us understand the risk versus reward for when we enter a stock. Chart School and Pattern Recognition. Base Counting

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IBD Meetup

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  1. IBD Meetup Chart School and Pattern Recognition, Module-4 Base Counting

  2. Chart School and Pattern Recognition • Base Counting • The reason we count bases is to help us understand the risk versus reward for when we enter a stock.

  3. Chart School and Pattern Recognition • Base Counting • Use weekly charts. • Growth stocks usually form a series of bases during their long price run ups. • Breakouts from third or fourth stage bases are often more likely to fail than breakouts from bases earlier in a stock's run. So it's best to avoid buying stocks that are breaking out of them. • When counting bases use these rules: • Each base should form at least 20% above the buy point of the base that preceded it. • If the advance is less than 20% and the stock builds another base, it's a base-on-base pattern and is counted as part of the previous base. • Many stocks will form bases while their fundamentals are soft. Generally you don't count these bases until the first one that forms when earnings and sales growth start running at least 25% on a quarterly basis.

  4. Chart School and Pattern Recognition- • Base Counting continued • Base Counts can be reset with: • Bear market decline of more than 20%. • Stocks start a fresh base count when they correct severely enough to undercut the low point in their last base pattern. • When they base for longer than 1.5 - 2 years. • With a 66% decline in the price of a stock. • Other Base Counting Issues • How long does a base need to be in order to be included in the base count (4, 5, 6, or 7 weeks)? • How long does a base need to be in order for it to be undercut and reset the base count (4, 5, 6, or 7 weeks)? • A base forms, and another one forms (up 15% from the first base), and another one forms (up 15% from the 2nd base). Is the third base a 2nd or 3rd stage base? Create your own definition. • You have a 20% correction on the Nasdaq, meeting the requirement to reset all bases. Is this base reset as “thorough” as the 2008-2009 bear market reset?

  5. Chart School and Pattern Recognition • Base Counting continued • Schematic showing 1st and 2nd stage base. The high of base 2 is more than 20% above the pivot point in base 1. $120.01 $100.00

  6. Chart School and Pattern Recognition • Base Counting continued • Schematic showing two 1st stage bases. $119.99 $100.00

  7. Chart School and Pattern Recognition • Base Counting continued • Schematic showing base count reset. The base on the right is now a first stage base.

  8. Chart School and Pattern Recognition Weekly

  9. Chart School and Pattern Recognition Weekly

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