Page 1209 - How to Make Money in Stocks Trilogy

192 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

Flat Base

Usually a Second-Stage Base
• Often occurs after a stock forms a cup-with-handle or double bottom
• Can offer another opportunity to start a new position or add shares to an
existing one
• Milder decline than cup-with-handle and double bottom
• Shorter time frame (minimum 5 weeks)

Ideal Buy Point
(10 cents above peak in base)
Buying
Range
(Up to 5% above
ideal buy point)
Prior Uptrend Depth %

Base Length

What to Look For
Remember how we mentioned the best stocks will form “stepping stones”
as they make their big moves? They’ll go up for a while, pull back to form a
new base, then resume their climb—giving you multiple opportunities to
make money.
The flat base is a classic example of that. They typically form after a stock
has made a nice gain from a cup-with-handle or double bottom breakout.
That’s why they’re often considered “second-stage” bases. (We’ll get into
that later in this chapter in “Go Beyond Just the Shapes.”)
Here are the key concepts to understand.

• Trading Sideways to “Digest” Earlier Gains: Stock will often break
out of a cup-with-handle or double bottom pattern, run up at least 20%,
then go sideways to form a flat base. It’s a milder decline than what you
see in other patterns—no more than 15%.