That it's up to you to decide. To make the choice of how you will treat it. Some say it doesn't work that way, some, including me, that it does. TDA is great. I am using it. So is IB. Guitar FTV. @vanzandt knows a thing or two about those.
Look in the back of the book for "Bases" in the index. He probably expands on what, which and how many. Tell us what you find. flat, square box, ... https://www.tradingview.com/ideas/flatbase/ Cup n Handle chart uvxy 10m, lower left. https://elitetrader.com/et/threads/cup-and-handle-on-bac.356343/#post-5336705 >
This is another interpretation of the concept of "previous resistance becomes the next support" basically meaning that if the price ever retreats, it *tends to*, not always, to the highest point that the price has ever reached in the most recently, i.e, previous resistance point and usually is a good buying point because the price *supposedly* wouldn't drop any further. If you look at the chart, the first base is indicated by a big curved line representing the lowest point that the price has ever dropped to. And then the second base is supposed to be where the price will drop the second time and according to this theory, it's supposed to be to or on top of the previous resistance, where the price reached the highest last time. From this chart, it's supposed to be on top of the highest level that the price reached from the first base. But what puzzles me is why is the second base is illustrated to be at $62 and not at $50? Since the first base, the price soared and then went back down to $50 before soaring again. So to me, that price drop to $50 should be the second base not when the price rose a second time and dropped back down again to $62. That $50 when the price dropped the second time is already around the resistance level from the first base and that should've been a good buying point because afterwards, the price really took off and even when it dropped back down, it was at a significantly higher level than both of the previous support levels and if you want to tp at this level, you would've netted a nice profit of ($62 - $50) = $12 per share. So wait until the price drops the third time and then set that to be the second base? That's giving up $12 for nothing. And what's even more strange is that the buying point isn't even set at the support level. It's set at the peak or the third resistance of $82??!! Why set the buying point so high at a resistance level? That is way too high of a buying level. It's not only giving up a profit of ($82 -$50) = $32 for nothing but is really at risk of buying at the peak and becoming fodder for people who are dumping the stock. The chart looks like it's from a book and I dunno what concept the book is trying is illustrate exactly but to me, if the book is illustrating the concept of "previous resistance becomes the next support", this chart is not an efficient way of showing it.
The cup & handle and the saucer base is also maybe what the OP's chart is trying to illustrate. But notice the buying point is set at the "handle" not at the top of the highest peak. On the OP's chart, the buying point would be at the $52 price level as I previously stated.
Cup n Handle chart uvxy 10m, lower left. https://elitetrader.com/et/threads/cup-and-handle-on-bac.356343/#post-5336128
Thanks. Awesome charts in the link. The more charts I look at the more I feel like I’m starting to get it
the chart was one of about 4 or 5 on the page illustrating a base on top of a base pattern. I see what you are saying, the buy point seems like a weird place to buy. As I said in my original post it’s from the bookHowto Make Money in Stocks by William O’Niell, which I’m sure you know. thanks for the detailed response.
%% Good question/ KG trend traderthose are some of the best books to help make a profit. [1] A base is just a pause in an uptrend, or downtrend\his 50 dma + 200 day moving average helped me much much MORE than any base pattern.................................................... [2] Actually its a perfect place to buy , buy new 52 week hi/that how he made his fortune, + = fund managing NYSE seat, pro data sales practical profit helping books . [3] You are not a ''dummy'' \simply learning. MAIN thing you are MISSING on that chart is a 200dma, most all his[IBD founder] have 200dma + all his best charts have a 200dma. [3-777] Pull up a IBD latest chart [investors.com] NTAP=86 EPS+ below 200dma sell signal. EVEN if the mini bulls in NTAP make money, some stuff is trending better above 200dma . IBF founder notes ''200dma = ''late sell signal ''+ in that case bases dont mean much@ all below 200dma to buy it + its now an 86 eps. That chart looks like 1999 or 2022in SPXS,SPXU, SDS.