example 1
The completion of the major base is signaled when the downward sloping bearish resistance line is exceeded. The width of the base must match the extent of the prior decline in order to go above the 45-degree bearish resistance line. This is a very practical rule that precludes premature entry into a stock prior to the completion of a sufficient base.
example 2
This stock has formed a major base and has broken out above the 45-degree bearish resistance line. It is still early in the move so we can’t know whether it will follow-through or not but the pattern looks promising.
example 3
A major base has taken over a year to complete. The move won’t be “for sure” until the relative strength can move above the recent resistance.
By W. Clay Allen CFA
Next: Breakouts - 1-2
Summary: Index