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Published On: Wed, Sep 27th, 2017

Do You Know How To Count Bases In Leading Stocks? Do It To Assess Risk

How are your base-counting chops? Do you recognize when a stock resets its base count? Do you know how many bases a winning stock racks up before it tends to run out of steam? If not, here’s a review.

Leading stocks normally form and break out of more than one base in the course of an advance. Keeping track of these bases is important because it helps gauge how much fuel a stock still has in its tank.

Initial bases can form after an IPO, after a market correction, or after some sort of turnaround in the company’s fortunes.

It’s important to remember that bases formed below $10, or those which occur before a company’s earnings show appreciable gains, don’t count as initial bases.

There are a number of different types of bases. But all have a few common needs. One is for an advance of at least 30% before the start of a base pattern. Second-stage or later bases require a 20% advance leading to the left side of the structure.

Advances before first-stage bases can start from the bottom of the prior correction. For second- and later-stage bases, measure the uptrend from the prior base’s buy point.

Leaders often generate follow-up or add-on buy opportunities Read Full Article

Source: Investor Corner – IBD

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