SXC Health Works On Base At Stage Two

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Symbol	Price	Change
SXCI	46.21	-0.74

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SXC Health Solutions (NasdaqGS:SXCI - News) is working on a second-stage base.

Although it broke out of bases in December and May, the current pattern is only second stage.

How so?

A bear market resets the base count to zero. The first base after the bear market is a stage-one base. Because the December base came before the bear market ended, it doesn't enter the count.

This is important because a first- and second-stage base is more likely to succeed than a breakout from a later base.

IBD research found that about 67% of third-stage bases fail and 80% of fourth-stage bases fail. (See today's Investor's Corner on B7 for a rundown on counting bases.)

SXC Health has completed five weeks in its current base. The depth is 19%, which means it cannot be a flat base. So this pattern probably needs at least a couple more weeks of work before it finishes a proper pattern.

It could use some accumulation too. The Accumulation/Distribution Rating fell from A+ in late August to D in late October. But since then, it has jumped to C.

This is a better performance than the Nasdaq. The index fell from A to D- in the same period and as of Friday's IBD had sunk further to E.