Bases

A Cheat Sheet for Identifying

Growth Stock Bases

Zazen Capital
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 ‘Overlap’ ‘Gap Up’

Open higher than Open higher than

previous close but previous high
not previous high

Reading Price

❑ High, Low Close

Positive

❑ Strong Closes
❑ Weak Closes
‘Skyscrapers’ or
More up days ‘Star Stepping’ Biggest volume ❑Gap Up (strength)
than down days Up volume since base ❑ Lap Up (strength)

Reading Volume
❑ Number of days
Negative

up or down
❑ Stair stepping
volume up or down
More down days ‘Star Stepping’ ‘Skyscrapers’ or ❑ Sky Scrapers Up
than up days Down volume Biggest volume
since base or down
Sound Bases:
❑Early stage bases
❑Prior uptrend
❑Handles in upper ½
❑Acc/Dist C or higher
❑Shakeouts near base low & in
handles
❑Strong RS 80 or greater at pivot
❑RS line at NH at or before
breakouts

Volume
❑Large up volume; light down
volume
❑Volume dries up in handle
❑Strong up volume on right side
of a base
❑Big volume at breakout 40% or
more

Price Action:
❑Tight Action not wide & lose
❑Tight closes
❑Closes near top of the range
❑Support at key moving
averages
❑Gap ups
left high side Cups (with/without handles)
❑Tea-cup shaped
❑ 7 Weeks or more
❑ 20-30% deep (50% bear market)
❑U shaped not V shaped
❑Pivot 0.10¢ above handle high or
no handle +10¢ left side high

Buy Point Understand Handles

handle peak
+0.10¢
❑ Drift Downward
handle high ❑1week or more
❑ 12-15% deep (+20% bear)
❑In Upper ½ of any base
❑Volume dries up
❑Pivot 0.10¢ above handle high

Saucers (with/without handles)

❑ Similar to a cup but shallower
❑ 7 weeks or more
❑12-30% deep
❑ Handle Upper ½ of base
❑Handle volume dries up
❑Pivot 0.10¢ above handle high
or no handle +10¢ left side high
Flat Base
❑ Rectangle or box shaped
❑Flat Base at least 5 weeks
❑ Square Box Base 4-7 Week
❑Depth usually < 15%
❑Typically not 1stage
❑Pivot +10¢ left side high
 Double Bottom Base
❑Shaped like a “W”
❑Length 7 weeks to +52
❑Depth not more than 50%
❑2nd bottom undercuts 1st
❑With or without handle
❑Pivot +0. +10¢ high of
handle or break above middle
of “W”

Ascending Base
❑Overall uptrend-3 pullbacks
with higher high & higher lows
❑ Length 9-16 Weeks
❑Depth 10-20%
❑Pivot +0.10¢ above left side
of high on 3rd pullback
❑Not usually a 1st stage base
❑Often formed when stock
resists general market
weakness
High Tight Flag
Flagpole up 100% or more
Typically in 4 to 8 weeks

Flag depth < 20%

Length 3-4 Weeks

Pivot +0.10¢ above pole peak

 Secondary Buy Points

•Rare formation signals demand is strong

•Takes two weeks to build (weekly chart only)
•Big surge (typically 10% to 20% can be +50%)
•2nd week trades tightly; closes within 1%
•2nd week’s high less than 1st week’s high
•Numerous short-stroke patterns fall flat

Once a stock
is 5% past its
previous
high, the
stock is
extended
IPO Base Secondary Buy Points
❑20% Prior uptrend
❑At least 9 day base
❑Max 20-25% correction in base
❑Best- RS outperforms market
❑Best - leading Industry Group
❑Best- Quality sponsorship
❑Pivot previous high +0.10¢
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