Michael Jordan was a failure.
“I've missed more than 9000 shots in my career. I've lost almost 300 games. 26 times, I've been trusted to take the game-winning shot and missed. I've failed over and over and over again in my life. And that is why I succeed.”
It's true that he wasn’t cut for his high school team. Also, he wasn’t the top NBA draft in 1984.
But that man kept his head low. He worked harder than everyone. One of the coaches shared that Michael continued to train after each game he played.
He pushed himself to turn his weaknesses into strengths. And strengths into perfection.
Michael was unforgiving to himself. And that is why he remains one of the greatest NBA players till date.
Here’s an example of someone who perseveres when he was going through a dry patch. In the end, the world took notice of his skills and passion.
The next chart pattern that you’ll learn is akin to Michael Jordan’s sports journey. There’ll be periods where it’ll remain in a consolidated price range.
Few can make money during this time unless you’re an experienced day trader.
But this pattern has the potential to make high profits.
So what’s this chart pattern?
According to Investors Business Daily, a flat base is a slight price contraction on a chart. It forms as a stock digests an earlier advance. The flat base is a key chart pattern for great stocks to form before hitting new highs and making huge gains.
As its name suggests, it has a flat appearance in an imaginary rectangular box.
It may look like the stock is lifeless, but this dull action is, in fact, good news.
HOW DOES FLAT BASE BEHAVE?
The flat base can form during a market correction or after a breakout from a cup-with-handle or double-bottom base.
It’ll make gains for few days or weeks, then stalls. Why? The market might not be ready to rally or is still weak.
It starts to build when the price consolidates to give the stock a chance to digest prior gains.
It’ll move sideways in a price range (between 10-15%) for more than a month (e.g., five weeks). That means there is a support line where price lows seem to hold and recover. And also a resistance level where price highs will touch then back off.
So when do you decide that the price has begun to form a flat base?
One way is to count the first week that shows a "weekly closing loss" at the beginning of the pattern.
The longer it remains in a tight range, the better. It’ll usually lead to high price breakout.
The volume should be low and dry as the flat base sets up. It says that nobody is paying attention.
WHY FLAT BASE?
The flat base is one of the bullish patterns where stocks form before making large price advances. While it may seem like a stock is going nowhere for weeks, it may be winding itself up for a big climb.
WHEN TO BUY?
To buy stock in a flat base, look at the highest peak (old resistance) on the left side of the chart pattern. Then wait for the daily stock price to break that resistance level at a high volume.
WHEN TO EXIT?
There are many strategies to unload your stocks. The main aim is to preserve your capital. And I’m going to show you how.
Say, you bought a stock after it broke out from the flat base at high volume.
After climbing for several days, the price action reversed. It began to decline.
And it pierced through the old resistance above the flat base.
Ok, remain calm.
Sell your stocks as soon as it dips below the lowest level of the flat base. You shouldn't lose more than 10% from the initial price that you bought.
To strengthen your basic understanding about flat base, study how this chart pattern behaves in actual stock price actions. See if you can spot a common trend in these examples.
The quiet and still activity from flat base is what makes it one of the bullish chart patterns.
WHAT’S IN FAULTY FLAT BASE?
So, what have you learn?
A flat base is a stock market classic, a time-tested, proven winner. Nothing communicates sudden buying activity than the flat base. A investor who buys based on this chart pattern will likely see profits within a concise time frame.
This chart pattern reflects unusual strength. Instead of bending lower, it keeps a steady price level. This action tells you the stock wants to run higher.
When the market finally begins to rally, the stock explodes out of its crouch position. Many past huge winners started their price moves from the flat base.