As a stock gains over the course of its price run, it may periodically pull back to form areas of price consolidations — also known as bases and chart patterns. That happens as some large investors sell shares, taking profits after a run-up. Each base is important to watch for since it’s where the stock typically takes a “breather” before resuming its climb, using the base as a springboard to climb higher as it resumes its journey up the chart. Bases are precursors to a winning stock’s next big move. They’re like stepping stones — resting areas where the stock pauses after climbing higher for a few weeks or months. The base is an opportunity for the stock to regain its strength and launch the next stage of its climb.
« Back to Glossary Index