How To Read Stock Charts

Blockhead01-13

The prior section on How To Buy Stocks focused on what stocks to buy. It covered stock lists and a stock screener to discover ideas, as well as stock ratings to evaluate your potential stock picks. In...

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Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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It covered stock lists and a stock screener to discover ideas, as well as stock ratings to evaluate your potential stock picks. In...</p>\n\n<a href=\"https://www.investors.com/how-to-invest/how-to-read-stock-charts-understanding-technical-analysis/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0784384876.USD","symbol_name":"Blackrock Global Multi-Asset Income A6 USD","start_time":0,"source_url":"https://www.investors.com/how-to-invest/how-to-read-stock-charts-understanding-technical-analysis/","article_id":"2503536536","we_media_id":null,"thumbnails":["https://www.investors.com/wp-content/uploads/2023/06/HTI_subject_Chatper6_v2-150x150.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2503536536","pubTimestamp":1736755812,"columns":[],"sourceInfo":{"source_id":"investor_business_daily_highlight","name":"Investor’s Business Daily"},"weMediaInfo":null,"summary":"When buying stocks, use stock charts and technical analysis, together with fundamentals, to learn how to invest safely and successfully.","collect":0,"end_time":0,"defaultTopTitle":"investors.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0784384876.USD":"Blackrock Global Multi-Asset Income A6 USD","LU2357305700.SGD":"Allianz Global Artificial Intelligence ET H2-SGD","LU2250418816.HKD":"BGF WORLD TECHNOLOGY \"A\" (HKD) ACC","LU0417517546.SGD":"Allianz US Equity Cl AT Acc SGD","LU1883839398.USD":"AMUNDI FUNDS INCOME OPPORTUNITIES \"A2\" (USD) ACC","WMT":"沃尔玛","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","LU0642271901.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD-H","LU2237443382.USD":"Aberdeen Standard SICAV I - Global Dynamic Dividend A MIncA USD","LU1127390331.HKD":"AB SICAV I - ALL MARKET INCOME PORTFOLIO \"A\" (HKD) ACC","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","LU0640476718.USD":"THREADNEEDLE (LUX) US CONTRARIAN CORE EQ \"AU\" (USD) ACC","LU0061474960.USD":"天利环球焦点基金AU Acc","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","LU2592432038.USD":"WELLINGTON MULTI-ASSET HIGH INCOME \"A\" (USD) ACC","LU0820561909.HKD":"ALLIANZ INCOME AND GROWTH \"AM\" (HKD) INC","LU0234572021.USD":"高盛美国核心股票组合Acc","IE00B775H168.HKD":"JANUS HENDERSON BALANCED \"A5M\" (HKD) INC","LU2092937148.SGD":"Blackrock ESG Multi-Asset A8 SGD-H","MACW.SI":"APPLE 3xLongSG261006","LU1934455194.USD":"AB SICAV I LOW VOLATILITY TOTAL RETURN EQUITY PORT \"A\" (USD) ACC","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","LU1868836591.USD":"CT (LUX) I AMERICAN \"1U\"(USD) ACC","BK4538":"云计算","SG9999015978.USD":"利安颠覆性创新基金A","LU2236285917.USD":"ALLIANZ GLOBAL INCOME \"AMG\" (USD) INC","LU0097036916.USD":"贝莱德美国增长A2 USD","IE0003U64NQ7.SGD":"PIMCO BALANCED INCOME AND GROWTH \"M\" (SGDHDG) ACC","LU0949170772.SGD":"Blackrock Global Equity Income A6 SGD-H","LU0861579265.USD":"联博低波幅策略股票基金A","SG9999014898.SGD":"United Global Quality Growth Fund Dis SGD","LU1674673428.USD":"HSBC GIF GLOBAL LOWER CARBON EQUITY \"AC\" (USD) ACC","LU1003077747.HKD":"BGF GLOBAL EQUITY INCOME \"A6\" (HKDHDG) INC","LU0354030511.USD":"ALLSPRING  U.S. LARGE CAP GROWTH \"I\" (USD) ACC","XRX":"施乐","IE00BKVL7J92.USD":"Legg Mason ClearBridge - US Equity Sustainability Leaders A Acc USD","LU2242649171.HKD":"FIDELITY FUNDS GLOBAL THEMATIC OPPORTUNITIES \"A\" (HKD) ACC","IBM":"IBM","LU2602419157.SGD":"HSBC ISLAMIC GLOBAL EQUITY INDEX \"AC\" (SGD) ACC","LU2286300806.USD":"Allianz Cyber Security AT Acc USD","LU0345770993.USD":"NINETY ONE GSF GLOBAL STRATEGIC EQUITY \"A\" (USD) INC","LU0957791311.USD":"THREADNEEDLE (LUX) GLOBAL FOCUS \"ZU\" (USD) ACC","HK0000320223.HKD":"TAIKANG KAITAI CHINA NEW OPPORTUNITIES FUND \"A\" (HKD) ACC","LU1066051225.USD":"HSBC GIF GLOBAL EQUITY VOLATILITY FOCUSED \"AC\" (USD) ACC","LU0289739343.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (SGD) ACC","SG9999014542.SGD":"United Income Focus Trust Acc SGD","LU1496350502.SGD":"FRANKLIN DIVERSIFIED DYNAMIC \"A\" (SGDHDG) ACC","LU1629891620.HKD":"ALLIANZ INCOME AND GROWTH \"AMG2\" (H2-HKD) INC","IE00B775SV38.USD":"NEUBERGER BERMAN US MULTICAP OPPORTUNITIES \"A\" (USD) ACC"},"translate_title":"如何阅读股票图表","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"XRX":1,"IBM":1,"WMT":1,"MACW.SI":0.6},"content_text":"The prior section on How To Buy Stocks focused on what stocks to buy. It covered stock lists and a stock screener to discover ideas, as well as stock ratings to evaluate your potential stock picks. In this section, we'll focus on when to buy stocks using stock charts and technical analysis; the optimal time for buying stocks.\n\n\n\n↑\nX\n\nNOW PLAYING\nHow To Make Moving Averages Work For Your Trades\n\n\n\n\nUnderstanding both fundamental and technical analysis is crucial to stock picking. To fully understand how to invest in stocks and the best time to buy, you also need to have a sound approach to stock market timing, as covered earlier.\nKeeping in mind these other aspects of stock investing, let's focus on how to read stock charts and understand technical analysis.\n\n\n\nQuick Links\n\n\n•Stock Charts Tell You A Story\n•What's In A Stock Chart?\n•Follow The Funds: Track Price & Volume With Technical Analysis\n•Spot Support & Resistance With Moving Averages\n•Using Chart Patterns To See When To Buy Stocks\n•New Highs And New Buys In Stock Charts\n•Cup And Cup With Handle: Common Chart Patterns\n•Double Bottom: Common Chart Patterns\n•Flat Base: Common Chart Patterns\n•Alternative And Add-On Buy Points\n\n\n\n\nStock Charts Tell You A Story\nWhen learning how to invest in stocks, stock charts can seem overly technical at first. Talk of moving averages, chart patterns, relative strength lines and other terms can scare off beginning investors. But put aside all the jargon of technical analysis to understand what stock charts really do. They tell you a story.\nStock charts simply give you a visual representation of changes in share price and trading volume. They cut through all the rumors, headlines, hype and fear. They paint an objective picture of what is really going on with the market and individual stocks.\nOnce you learn what to look for, you'll see that stock charts and technical analysis give you objective, fact-based insight into key questions that impact your stock investing strategies.\n\nAre mutual fund managers enthusiastically buying? Or are they aggressively dumping shares?\nDespite some recent price declines in a particular stock or in the stock market indexes, have institutional investors actually been stepping in to support the stock and pick up more shares?\nHow have big investors reacted to recent news about the stock? Did they sell even though the news was good? Or did they buy more shares even though the news was bad?\n\nBy the end of this section, you'll know the basics of how to use stock charts. You'll also see how to use technical analysis to make sense of the \"story\" the charts are telling. Once you've done that and also gone through the earlier sections, How To Buy Stocks and Stock Market Timing, you'll have a solid understanding of how and when to buy stocks. These approaches to technical analysis will also help you learn when to sell stocks.\n\nWant To Expand Your Investing Skills? Join An IBD Meetup Group — Online From Anywhere\n\nWhat's In A Stock Chart?\nSome services make stock charts overly complex, adding too much non-essential information. IBD charts are clean and simple, featuring all the key indicators you need to answer the questions mentioned above to understand the \"story\" the chart is telling. Our stock charts are also color-coded to make it easier to spot daily and weekly moves, as well as spot trends.\nHere's a quick look at the key elements to look for in a stock chart. (The discussion below focuses on the daily and weekly charts, but the same concepts apply to monthly or intraday stock charts.)\n\nPrice: Using either a daily or weekly timeframe, price area in the stock chart shows changes in the price. The vertical bars in the price area chart show the share price range for that day or week. A small intersecting horizontal dash within the price bar indicates the current price or where a stock closed at the end of the day or week. The color of the price bar represents whether the stock closed up (blue) for the day or down (red) for that period.\nVolume Bars: The vertical bars in the volume area indicate the volume (i.e., number of shares traded) that day or week. As with the price bars, the color of the volume bar represents whether the stock closed up (blue) for the day/week or down (red) for the day/week. In the volume area, the red line shows the average volume for that stock over the last 50 days (for daily chart) or 10 weeks (for weekly chart).\nMoving average lines: This horizontal red line tracks the average share price over the last 50 days (daily chart) or 10 weeks (weekly chart) of trading. The horizontal line tracks the average share price over the last 200 days or 40 weeks of trading.\nRelative strength line: This line compares the price movement of that particular stock to the price movement of the S&P 500, which is often used to represent the general market. If the relative strength line is trending up, the stock is outperforming the S&P 500. If the relative strength line is trending down, it means the stock is lagging the overall market.\n\n\n\n\n\n\nDaily Vs. Weekly Stock Charts: Use Both\nInvestors new to stock investing may wonder if they should use daily or weekly stock charts. The short answer is use both.\nWeekly charts help smooth out daily price fluctuations, making it easier to identify longer-term trends in both the market indexes and individual stocks. Daily charts helps you spot specific buy points, buy zones and sell signals.\nUsing the daily and weekly stock charts together helps distinguish between normal price changes and a true shift in trend. That will prove valuable when it comes to both pinpointing the best time to buy — and deciding if it's time to sell or just sit tight.\n\nFollow The Funds: Track Price And Volume With Stock Charts\nWhat is the most immediate and effective way to monitor demand in the indexes and individual stocks? Track price and volume fluctuations in both daily and weekly stock charts.\nYou can also measure how heavily stocks are being bought or sold with stock ratings and features, such as the Accumulation/Distribution Rating and the up/down volume ratio. But stock charts provide the most timely way to gauge buying demand — or a lack thereof — by mutual funds and other large investors that drive the market.\nJust click inside the price area on a daily or weekly chart to pull up a data box like the one shown in the screenshot below. You'll find the latest price and volume information, including:\n\n\nHigh and low price for day or week selected\nMost recent price\nPrice change for the day or week selected (in dollars and percentage)\nVolume (i.e./ number of shares traded) for the day or week selected\nVolume % Change: Shows how far above or below average the volume is for the day or week selected\n\nTracking price and volume in tandem with each other gives unbiased, opinion-free insight into the behavior of the market and individual stocks. As mentioned earlier, stock charts tell a story. A combination of price and volume are at the heart of the storytelling.\nUnderstanding Scenarios And Trends\nConsider these scenarios and what they reveal. To understand these scenarios and related trends, IBD stock charts show how the volume compares to the stock's 50-day and 200-day moving averages on the daily chart, and the 10-week and 40-week moving averages on the weekly chart.\nIn addition to the volume, also watch at what price the stock closes on an individual day or week. It's a sign of demand to see a stock close in the top half of the price zone for the day or week.\n\nBig Price Gain In Heavy Volume: This shows that the significant move in share price is backed by strong demand, as confirmed by heavy trade.\nLarge Price Gain In Light Volume: Potentially signaling a head fake, the stock has risen but a lack of volume shows hesitation or uncertainty among large investors.\nBig Price Decline In Heavy Volume: One down day or week doesn't necessarily trigger a sell signal. But a significant decline in heavy trade is warning sign. It indicates that large investors may be heading for the exits.\nSmall Price Decline In Light Volume: Below-average volume on a down day or week may indicate that large investors are generally holding on to shares in hopes of bigger gains. This scenario can emerge as a stock sets up a base or builds a handle.\n\nUnderstanding the importance and meaning of price and volume is essential to understanding stock charts, chart patterns and buy points. Another key element for understanding chart patterns that form the basis for determining buy points is the concept of support and resistance.\n\nSupport And Resistance: The Key To Understanding Chart Patterns\nYear after year, decade after decade, the same handful of chart patterns show up again and again. Technologies and company names will change, but these core patterns never do.\nIBM (IBM) in the 1930s. Xerox (XRX) in the 1940s. Walmart (WMT) in the 1970s. Apple (AAPL) in the early 2000s. Whatever the leaders were then and whatever they are right now, the patterns do not change.\nThey continually repeat because they're based on human nature and the ever-present emotions of hope, fear and greed.\nAs we'll see, chart patterns — also known as bases or consolidations — serve as launching pads for a stock's big price move. Learning how to spot these formations enables you to buy stocks at the best time with the least amount of risk.\nBefore getting into different types of chart patterns like a cup with handle, double bottom or flat base, let's look at the basic concept behind them. At its core, learning how to read stock charts and chart patterns comes down to tracking support and resistance.\nThink in terms of a \"floor\" of support and a \"ceiling\" of resistance.\nHitting A Ceiling Of Resistance\n\nWhether due to a market correction, a problem with the stock itself, or a combination of both, a stock will sometimes go through a down period. When that happens, you can see the stock hitting this ceiling of resistance in the stock chart.\nYou can assess how aggressive the selling is by checking the price and volume action in the stock chart, as we saw earlier.  As the downturn continues, look for signs that mutual funds and other large investors have stopped selling heavily and started to pick up more shares.\nSuch signs will come in the form of lighter volume on down days and weeks, and heavier buying on the upside. Trading will also start to tighten up, with less volatile price swings. Once the stock settles down, it will begin to move sideways and form the bottom of a base or chart pattern.\nFinding A Floor Of Support\nThe bottom of the base forms the floor of support, which may come at a moving average like the 10-week or 50-day line. Or it may come around a certain price area for the stock.\nIf institutional investors believe in future prospects of the stock, they'll start to establish new positions or add to existing ones. Once the floor of support is established, the stock will begin to climb, forming the right side of the chart pattern.\n\nStock Charts Reveal The Best Time To Buy Stocks\nAfter a stock has established a floor of support and built the right side of a chart pattern, it will eventually run into a new ceiling of resistance. That becomes a testing ground for the stock.\nWill the stock bump its head against that ceiling and fall back down? Or will it punch through that ceiling in big volume and break out to new highs?\nThat line of resistance establishes the ideal buy point. If the stock has the power to punch through the ceiling in strong volume (and market trends are favorable), chances are high that the stock is ready for a new run.\nStock investing is all about keeping the odds in your favor. Such action in  the stock chart shows that the stock has established support and found enough demand to break through that prior area of resistance. Known as a breakout, it gives investors the highest likelihood of success, with the least risk of failure.\nOf course, there are no guarantees in the stock market. Depending on overall market conditions and other factors, some breakouts will fail. As part of the three key tenets of how to make money in stocks, waiting for a stock to form a chart pattern and break out is essential to understanding how to buy stocks.\nThe Best Stocks Form Multiple Chart Patterns And Breakouts\nLike steppingstones, leading stocks typically form multiple chart patterns as they make their big moves over several months or even years. The process we just went over of finding support, hitting resistance, and breaking out past new buys points continues to repeat.\nBelow is a simplified version of what that looks like.\n\nThe biggest gains typically come on breakouts from early stage bases. After a stock has formed and broken out of a couple of chart patterns, risks increase. That's because once a stock has formed multiple patterns, it has, by definition, already made a significant climb. At some point, it will run out of steam and retreat. Then the stock will reset its base count by undercutting the low in the most recent pattern. That drops the count back to one, potentially setting the stage for a renewed climb.\nHow Bases, Market Trends Correlate\nNote that there is a strong correlation between base counts and overall market trends.\nFirst, chart patterns often form during market corrections. And breakouts from buy points tend to happen around the same time the market trend is showing rising strength or resilience as indicated in the The Big Picture and Market Pulse.\nSecond, you'll often see stocks forming third-, fourth- or later-stage chart patterns when the market indexes have also already made a significant move. So when using stock charts to pinpoint bases and buy points, also take into account the concept of stock market timing discussed earlier. Understanding that relationship is key to understanding how to invest in stocks.\nFinally, the depth and length of chart patterns tend to mirror what is happening in the stock market indexes. In short and shallow market corrections, you'll see many stocks form similarly short and shallow chart bases. In a severe and extended bear market, you'll see that reflected in the chart patterns stocks form in that environment.\nSo it's not unusual to see growth stocks that made big gains in the prior bull market fall sharply and form long and deep bases in the bull market that follows.\nInvesting Tip: See how to count bases to manage risk and keep the odds in your favor.\n\nNew Highs And New Buys In Stock Charts\n\nFor each of the telltale chart patterns coverer here, a key requirement is that the stock be at or near a new price high as it breaks out.\nA new price high is a sign of strength and an important reminder of this historical stock market fact regarding how to buy stocks:\n\nStocks hitting new price highs tend to go higher.\nStocks hitting new price lows tend to go lower.\n\nAvoid stocks trending down and hitting new lows. To improve your stock investing, focus on stocks showing strength as they climb into new-high ground and break out of a sound chart pattern.\nThe New Highs list features stocks at or near new price highs.\n\n\n\nThe 3 Most Common And Profitable Chart Patterns\n\nWhen getting started with stock investing and how to read stock charts, focus on the three primary patterns. While there are other types of bases, these are the most common and they consistently produce impressive gains in every market cycle.\nBy using stock charts to spot these bases, you'll be able to get in early on the best stocks to buy and watch.\nSo start by getting to know these three common chart patterns and the buy points they provide.\n\nCups: Cup with Handle and Cup without Handle\nDouble Bottom\nFlat Base\n\nCups: Cup With Handle\n\nWhat To Look For In A Cup With Handle\nPrior uptrend of at least 30%\nTo form a proper chart pattern, you have to have a prior uptrend. The idea behind bases is that after making a decent run, the stock takes a breather, then forms stepping stones to set up an even higher climb.\nBase depth: 15%-30%\nThe depth of the base — measured from the peak on the left side of the cup to the lowest point of the cup — should be between 15% and 30%. In a severe bear market, the depth may be 40% — 50%. As a general rule, look for stocks that held up relatively well during the market correction. For example, let's say one stock on your watchlist dropped 35% while another's base depth is only 20%. All else being equal, the stock with the 20% decline could be forming a stronger base.\nBase length: At least 7 weeks\nThe first down week in the base counts as week 1.\nThe minimum length for a cup with handle is seven weeks, but some can last much longer — several months or even a year or more. Be wary of any chart pattern that has the shape of a cup with handle but is only, say, five weeks long. That's typically not enough time for the stock to consolidate the prior gains. Such bases have a higher chance of failing.\nHandle\nThe handle should be a mild pullback on relatively light volume. The depth of the handle should be 10%-12%. Additionally, the handle should form in upper half of the base. The peak of the handle should be within 15% of old high on the left side of the cup.\nA handle is a shakeout of weaker holders — those not committed to holding the stock longer term. A sharp decline of more than 12%-15% in heavy volume could indicate a more serious sell-off, one that might prevent the stock from launching a successful move.\nIf the handle begins forming too soon (i.e., in the lower half of the base), it could mean institutional buying is not yet as strong as it needs to be to push the stock higher.\nWho Are Weaker Stock Holders?\nWho are the weaker holders getting shaken out in the handle? Typically, they're investors who bought late, right at the end of the prior uptrend. When the stock sold off to form the left side of the chart pattern, they suffered a sharp loss. Getting a profit is no longer their goal. They just hope to recoup some of their losses. So as the stock nears that old high — and the weaker holders' break-even points — they start to sell.\nHere's why that shakeout is healthy.\nHaving a lot of weak holders in a stock means that whenever the share price rises, these weak holders will sell shares, pushing the price back down. (This happens when a stock has excessive overhead supply.) Once most of the weaker holders are out of the picture, it's easier for the stock to move higher with less selling pressure or resistance.\nWhat about the big investors who have been picking up shares as the stock formed the right side of the cup?\nThese investors are more committed and are holding onto their shares. That's why the volume in the handle is light.  Only the weaker holders are selling. The large institutional investors are sitting tight in expectation of a new upward climb.\nIdeal Buy Point: Clearing point of resistance in the handle\nThe ideal buy zone is up to 5% above the ideal buy point.\nThe buy point in a cup with handle and other chart patterns is determined by a line of prior resistance, in this case the peak in the handle. If the stock can clear that peak (i.e., the prior ceiling of resistance) in heavy volume, chances are good it is ready to ride that breakout into a new run.\nIf the ideal buy point is, say, 30, then the buy zone would range from 30 to 31.50 — 5% above the optimal initial entry.\nMore About Ideal Buy Points\nFor best results, buy stocks as close to the ideal buy point as possible.\nAvoid buying stocks that are extended more than 5% above the initial buy point. Once a stock climbs more than 5% above the ideal buy point, it's considered extended beyond the proper buying range.\nStocks often pull back a bit after a breakout. So if you buy extended, there's a higher chance you'll get shaken out of the stock because it triggers the 7%-8% sell rule. (Learn more here about when to sell stocks.)\nVolume on day of breakout: At least 40%-50% above average\nOn the day a stock breaks upward past its ideal buy point, volume should be at least 40%-50% higher than normal for that stock. That shows strong institutional buying. On many breakouts, you'll see volume spike 100%, 200% or more above average. Light or below-average volume could mean the price move is just a head fake, and the stock is not quite ready for a big run.\nAlso note that sometimes you will see a stock climb right up to the ideal buy point then run into renewed resistance. That's why you want to confirm demand by seeing a stock punch through that buy point in heavy trade.\n\n\nChart Patterns: Cup Without Handle\n\nThe cup with handle — also called a cup-shaped base or simply a cup — is a variation on the cup-with-handle chart pattern. As the name implies, it's essentially the same, except it doesn't have a handle. All the attributes (including heavy volume on the breakout), except for the buy point, are identical.\nThe buy point in a cup-shaped base is determined by the peak on the left side of the cup — the most recent area of resistance.\nHow To Buy Stocks On Breakouts From Cups\nBelow are examples of winning stocks that launched big runs from the cup-with-handle and cup-without-handle chart patterns.\nBoth the daily and weekly charts are included. As covered earlier, weekly stock charts show the longer-term trend, while the daily charts show the action on the actual day of the breakout. Be sure to use both!\n\n\nChart Patterns: Double Bottom\n\nWhile the shape is different from a cup with handle, the core concept behind a double bottom is essentially the same.\n\nMirroring The Market: Double bottoms tend to form while the overall market is volatile, and that's reflected in the shape. You have one down leg, then the stock tries to rally but hits resistance and ends up pulling back to form a second down leg. The stock rebounds one more time and is finally able to punch through and move higher. The breakout typically occurs when the market indexes have also bounced back from a correction into a new uptrend.\nSupport And Resistance: Like the cup with handle and all other bases, the buy point for a double bottom is determined by the most recent area of resistance. That's the peak in the middle of the W. Breaking through that resistance on unusually heavy volume shows institutional investors are back in the game, aggressively scooping up shares.\nShakeout: Remember how the handle in the cup with handle shook out the weaker holders? You have the same concept here, just in a different place. Note how the bottom of the second leg in a double bottom undercuts the bottom of the first leg. That gets rid of the weaker holders, leaving more committed investors who create support for the stock's new run.\n\nWhat to Look For\n\nPrior uptrend: 30% or more\nBase depth: 40% or less\nBase length: At least 7 weeks (first down week in base counts as week 1)\nPeak in middle of W: Should form in upper half of base and be below left-side peak\nUndercut: Bottom of second leg down should be lower than bottom of first leg down\nBuy point: The peak in the middle of the W (buy range is up to 5% above the ideal buy point)\nVolume on day of breakout: At least 40%—50% above average\n\nHow To Buy Stocks On Breakouts From Double Bottoms\nBelow are examples of winning stocks that launched big price runs from a double-bottom chart patterns.\n\n\n\nChart Patterns: Flat Base\n\nEarlier we saw how the best stocks usually form \"stepping stones\" as they make their big moves. They'll go up for a while, pull back to form a new chart pattern, then resume their climb — giving you multiple opportunities to make money. Flat bases are classic examples of that. They typically form after a stock has made a nice gain from a cup with handle or double bottom. That's why they're often considered second-stage bases.\nHere are the key concepts regarding flat bases.\n\nTrading Sideways to \"Digest\" Earlier Gains: Stocks will often break out of a cup with handle or double bottom, run up at least 20%, then trade essentially sideways to form a flat base. It's a milder decline than what you see in other patterns — no more than 15%. The price range will usually remain fairly tight throughout the base. That indicates institutional investors establishing or adding to their positions, trying to buy shares within a certain price range. This allows them to increase their holdings without significantly driving up their average cost per share.\nSupport and Resistance: Here again the buy point is determined by the most recent area of resistance — the highest price point within the flat base. Until the stock breaks through that \"ceiling\" (preferably in above average volume), it won't be able to launch the next leg of its climb.\nShakeout: Like other patterns, flat bases also have a way of shedding weaker holders. Instead of a sharper sell-off like the handle in a cup with handle or the second-leg undercut in a double bottom, the flat base shakeout is more of a slow grind. The weaker, less committed investors just get worn out by the indecisive, sideways action and eventually lose patience and sell.\n\nWhat to Look For\n\nPrior uptrend: 30% or more\nBase depth: 15% or less\nBase Length: At least 5 weeks (first down week in base counts as week 1)\nBuy point: The peak within the base (buy range is up to 5% above the ideal buy point)\nVolume on day of breakout: At least 40%-50% above average\n\nHow To Buy Stocks On Breakouts From Flat Bases\nBelow are examples of winning stocks that launched big price runs from a flat base.\n\n\n\nHow To Buy Stocks At Add-On And Alternate Buy Points\n\nCups, double bottoms and flat bases are the main chart patterns that launch big runs. But the best stocks will also typically offer additional buying opportunities as they make their climbs. You can use those entries to add to your existing position or, in some cases, initiate a new one.\nLess Is More\nSince these are considered secondary buy points, it's a good idea to buy fewer shares than you would from an initial position in a cup with handle, double bottom or flat base.\nThat's especially true if you're buying more shares in a stock you already own. In that case, you always want to buy fewer shares than you purchased in the initial breakout. That keeps you from running up your average purchase price too much.\nBelow are two of the most common alternate and add-on buying opportunities:\n\nThree-Weeks-Tight\nPullback to 10-Week or 50-Day Moving Average\n\nBuying Stocks Using Stock Charts: Three-Weeks-Tight\n\nLike a flat base, this occurs after a stock breaks out, goes up for a while, then pauses to digest those gains. As the name implies, it only takes three weeks to form. (Stocks may also form four-weeks-tight consolidations.)\nWhat to Look For\n\nEach weekly close should be within about 1% of the prior week's close. That's what creates the \"tight\" range you see in the stock chart. Remember to focus on the weekly closing prices. During the week, the share price may move around a bit, but you're focused on where it closes the week. What do the tight closes tell you? That institutional investors are holding onto their shares. Fund managers and other professionals expect more from the stock, so they're not taking their profits off the table. In fact, they're likely quietly accumulating more shares from weaker holders that get tired of waiting and sell. That's what keeps the stock in that tight and narrow price range.\nBuy point: The peak in the formation, which is the most recent area of resistance. The buy range is up to 5% above the ideal buy point.\nVolume on day of breakout: At least 40% above average.\n\nBelow is an example of a stock that launched a big price run from a three-weeks tight.\n\n\nBuying Stocks Off 10-Week or 50-Day Moving Average\nAfter a stock has broken out of a proper chart pattern, it may pull back to the benchmark 10-week or 50-day moving average lines.\nIf the stock bounces off the moving average and shoots higher on heavy volume, it can offer a chance to buy shares. It shows institutional investors are stepping in to \"support\" the stock and protect their position. It happens around these moving averages simply because professional investors use those lines as key benchmarks.\nWhat to Look For\n\nLook for light volume on the pullback. This shows professional investors are not aggressively selling shares. Volume may be above average certain days or weeks during the pullback, but overall it should be \"drying up\" or getting lighter as the stock moves lower toward the moving average line.\nMake sure the stock bounces off the moving average line and heads higher on heavy volume. You want the stock to rebound and show strength, not weakness, before you buy. This is not about \"buying on the dips.\" Never buy a stock as it's moving down. Wait for it to bounce higher before investing.\nBuy as close to the moving average line as possible. As the stock bounces off the 50-day or 10-week moving average line, you want to buy as close to that line as possible. The farther away from the line you buy, the riskier it gets.\nFocus on the first two pullbacks. The best gains typically come from the first two pullbacks to the 10-week or 50-day moving average. By the time a stock's third or fourth retreat occurs, it likely has already had a good move. Chances are now higher that the pullback is actually the start of a more serious sell-off.\n\nBelow are examples of winning stocks that launched good gains from a pullback to the 10-week or 50-day moving averages.\n\n\n\n\n\nLearn More About How To Invest In Stocks\nUse the links below to learn more about stock investing and how to invest in stocks using IBD and The IBD Methodology — and discover how to stay both profitable and protected.\n\n\n\n\nHow To Invest In Stocks: Investing For Beginners\nHow To Make Money In Stocks: 3 Key Factors For Stock Investing\nStock Market Timing: Can You Time The Stock Market?\nHow To Handle Changing Stock Market Trends\nHow to Buy  Stocks\nBuying Stocks Using Stock Charts  & Technical Analysis\nWhen To Sell Stocks\n\n\n\n\n\n\n\nHow To Invest Lessons, Videos, Podcasts And Events\n\n\n• Investor's Corner: Daily lessons covering all aspects of investing\n• Investing Videos: Videos featuring stock investing experts\n• Investing With IBD Podcast: Weekly look at stocks to watch and market trends\n• More Educational Resources: Online and in-person webinars and workshops","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.30.2","shortVersion":"4.30.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2503536536"}