What is a base on base pattern?

A base on base pattern is bullish continuation pattern. It occurs to strong stocks that are in a bearish environment. In these stocks they will still be in a little bit of an uptrend.

They will break out to the upside. However there is not enough buying pressure to move it up further. This is what happened to this stock.

If the stock is not strong enough it will eventually be pulled down. Be careful when trading this type of stock for that reason.

Why does this pattern form? This pattern is simply a bunch of bullish rectangle patterns on top of each other. Often times a stock in an uptrend will run up too fast and they will need to stop and “cool off” while the stock builds up more bullish momentum.

When the stock builds up enough bullish momentum it will shoot through resistance and cause a buy signal. It is typical for stocks in an uptrend to do this over and over again.

When the markets turn bullish again you can look at these stocks to show strength and leadership. They will typically have larger gains.

Other Chart Patterns

There are many different patterns in the market that often form because investors tend to make the same mistakes over and over again. Knowing how to read these patterns and how to play them can give you a slight edge in the market. Here are some other patterns which you may want to look into.

Dead Cat Bounce - This is something a stock will often do after there is some bad news on the company.

Bullish Rectangle Pattern - This is a pattern which occurs very often in an uptrend.

Head and Shoulders - This pattern marks the end of the current trend.