10/14/23, 1:55 PM Gmail - How to Count Bases & Why You Should?

BIJIT SAHA <buzz.saha@gmail.com>

How to Count Bases & Why You Should?

MarketSmith India <Learn@williamoneilindia.com> Sat, Oct 14, 2023 at 12:00 PM
To: buzz.saha@gmail.com

Learning article

How to Count Bases & Why You Should?

We have discussed about identifying a correct buy point using common chart pattern/base formation
such as cup-with-handle, double bottom, and flat base. Along with the type of base, it is important to
understand the stages of base.

Stages begin at one and increase with each subsequent base pattern formed. The magnitude of the
move between two base patterns will determine whether the stage moves numerically or alphabetically.
If the price move from the pivot point of the prior base to the left side high of the current base is 20% or
more, the stage will increase by a factor of 1—for example, from Stage 1 to Stage 2.

https://mail.google.com/mail/u/0/?ik=46ab6b99bb&view=pt&search=all&permmsgid=msg-f:1779711367205750530&simpl=msg-f:1779711367205… 1/4
10/14/23, 1:55 PM Gmail - How to Count Bases & Why You Should?

If the price move is less than 20%, the stage will increase by an alphabetic factor—Stage 1a to Stage
1b.

The base stage and count are always reset to 1 once an intraday low price undercuts the low of a
previous base.

The current leaders in the market have formed both early- and late-stage bases. Base stages help
investors identify the progress a stock has made in its price advance, the biggest clue to a stock’s

https://mail.google.com/mail/u/0/?ik=46ab6b99bb&view=pt&search=all&permmsgid=msg-f:1779711367205750530&simpl=msg-f:1779711367205… 2/4
10/14/23, 1:55 PM Gmail - How to Count Bases & Why You Should?

remaining growth potential.

It is a good idea to track the number of bases a stock has formed during its current run-up. As a rule of
thumb, try to buy stocks that are breaking out of the first or second base of their run. Late-stage bases
are riskier. Late-stage means a base that is number three or higher in the base count.

After forming a fourth base, most growth stocks can’t rally much further, if at all. What usually follows is
a long, steep slide. After a stock has had a large advance without a major correction, the probabilities
are greater that institutional investors will cash in their profits and push the price into a serious decline.

By the time a stock forms a late-stage base, it is usually widely known to investors and running short on
fresh buyers. In addition, the late-stage base tends to have unsteady price swings, bouts of strong
selling, or other flaws. It is the chart’s way of telling you that the best buying opportunities are gone.

Late-stage patterns can work and sometimes do lead to nice gains, but you should understand that they
involve more risk. If you buy a stock on a late-stage breakout, be sure to cut your losses quickly if the
stock fails to gain traction and begins to head south

Watch our webinar on "The Importance of Chart Patterns"

Model Portfolio Frequently Asked Questions

What do you think? Please email 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.

Performance computations reflect a time-weighted rate of return and includes a brokerage of 0.5%. All
holdings are rebalanced to equal rupee amounts daily. Dividends are not considered in computations.
Percent gains and losses are calculated for all issues that remain on the “Current Holdings” at the end
of the day. For stocks that were added to “Current Holdings”, the basis used to calculate the percent
change is the price noted when the issue appeared as a “Current Holdings” in MarketSmith India. For
stocks that were removed, the selling price used to calculate the percent is the price noted when the
issue appeared as “Removed” in the MarketSmith India. For more information, see our Legal
disclosures here.

Registration granted by SEBI, membership of BASL and certification from NISM in no way guarantee
performance of the intermediary or provide any assurance of returns to investors.

Investments in securities market are subject to market risks. Read all the related documents carefully
before investing.

William O'Neil India

SEBI Registration No. - INA200005125 - Non-Individual

Office Address - Akshaya Tech Par, EPIP Area, Whitefield, Bangalore 560048

Compliance & Grievance Officer - Varun S R - varun.sr@williamoneilindia.com +7349630038

https://mail.google.com/mail/u/0/?ik=46ab6b99bb&view=pt&search=all&permmsgid=msg-f:1779711367205750530&simpl=msg-f:1779711367205… 3/4