With the Market turning volatile this year, multiple stocks have formed base-on-base patterns. Watch out for those because they tend to be stable chart patterns. The base-on-base is a combination of two bases where stock forms a base but does not rise much in price from its buy point. That’s often because the general Market comes underselling.

Therefore, a new base starts taking shape at a greater elevation than the first one. On a chart, the two patterns mirror the profile of two stair steps. Sometimes, the breakout from the second base will come after the selling pressure in the Market has risen.

Here are 5 features to help identify the pattern:

  • The two bases can be of any conventional type: cup-with-handle, flat base, double bottom, cup-without-handle. Typically, though, the second formation is a flat base.
  • The second base should not infringe much into the price levels of the first. Any base that drops much into the first base is not a proper base-on-base formation.
  • The buy point is decided by the second base, whatever that is.
  • While counting bases, a base-on-base formation counts as a single stage. Don’t count cup-with-handle as the first stage, and a flat base on top of it as a second-stage base.
  • If a stock ascends more than 20% from its buy point before it starts building the second base, count the two patterns entirely separate, not a base-on-base.


Learn more about chart patterns at www.marketsmithindia.com.