Long Bases Most Visible On Weekly Stock Charts

Investor's Business Daily

Wealth-Making Patterns: Second In A SeriesClaude Monet was awesome. But go to La Musee Marmottan Monet in Paris (if you like Monet) and what will you see

Some viewers walk right up and put their face right into the painting, as if they want to smell it. They are awed by the minutest details of brush stroke and texture. But they miss the fuller view of the brilliant painting.

Stock charts can be the same way. It takes some stepping back to catch long patterns that may otherwise go undetected.

That's how many long cup or saucer bases appear. Some of these cups can run from three to 12 months. That's where weekly charts come in handy.

Might you lose that day-to-day scrutiny that appears in the daily charts? Certainly, but you needn't abandon them. Use daily charts in conjunction with weekly charts.

Look at discount retailer Ross Stores' (ROST) saucer that it formed from October 2009 through early March 2010 1. It ran just 16% deep.

This is the sort of pattern that might not have been so obvious if you were just flipping through daily charts. A look at the weekly chart would have left you no doubt this was a pattern to study.

Length doesn't necessarily translate to a solid base unless the pattern has the proper characteristics. A good long base will have tight price movements, up weeks in heavy — just like a good short base.

Ross Stores' base was tight, but did suffer from one week of intense volume 2.

The stock broke out and advanced more than 15% until it started correcting again. Ross formed another long, constructive base 3. That led to a long climb.

Ross Stores shows a second reason to scour the weekly charts: They can tell you if a stock has gone from volatile to tight action, or vice versa.

For example, before Ross formed its two saucer bases, it came out of a base with a severe 48% decline.

On the weekly chart, you'd have seen the 21-week base that ran just 16% deep. Where did all this tighter action come from? From funds that had discovered Ross Stores. They supported it on any pullback.

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