Page 708 - How to Make Money in Stocks Trilogy

Dojo Training: Following a Proven Strategy to Find Winning Stocks 13

favor. Market history shows that stocks vault out of these areas of consolida-
tion before moving even higher. But buying a stock that is extended in price
from a proper base makes the trade more risky since the stock may pull back
and can shake you out of a position.
There are three main base patterns that we look for in CAN SLIM
Investing.
1. The most common base is the cup-with-handle pattern. It looks like a
tea cup with a handle.

Buy point
Old high

2. The double bottom base looks like a W with the exception that the right
part of the W undercuts, or drifts down below, the left side of the W.

Buy point

3. The flat base moves sideways in a tight range as the stock digests a pre-
vious move up.

Buy point

Buying stocks just as they come out of bases or areas of consolidation
increases your odds of success. Look for volume that is 40% above average
on the breakout.
Some secondary buy points include: (1) A three-weeks-tight pattern
(where a stock closes three weeks in a tight range with less than a 1% dif-
ference in closing price during that time). (2) A stock may be bought or