As the stock continues its uptrend higher through the Cycle Of Price, it will consolidate and move sideways to retest the moving averages multiple times.
The Base n’ Break is another pullback into the moving averages after the EMA Crossback.
When strength has been confirmed, and buyers continue to support the stock, you will see the price advance to new highs, followed by a brief pause before continuing its uptrend. The Base n’ Break may align with a more traditional larger base or in a shorter pattern when the stock is well into new highs.
As the Cycle Of Price progresses over time, Oliver Kell uses the Base n’ Break to add to leading stocks and as a way to understand where we are within the current trend. Learn to understand where you are within the cycle to help you plan your trade when determining position sizes and holding periods.
Another Pullback To The Moving Averages
The Base n’ Break is a shorter pattern when you are already above the moving averages and near highs and begin to see another consolidation into the moving averages. Like the EMA Crossback, a pivot forms, creating a tradable range.
You will notice these steps in the Cycle Of Price form in only 1-3 weeks. When observing each step, look for positive price action, the stock being supported off the lows, and then more accumulation through a pivot.
During the uptrend, there may be multiple Base n’ Breaks as the stock progresses higher. Each consolidation provides another area to increase your position size, but more importantly, it helps you understand how far along in the cycle the stock is.
Symbol: LLY
Company: Eli Lilly & Co.
Year: 2021
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Multiple Base n’ Break Areas
As the cycle continues, multiple Base n’ Breaks will occur during the stock’s uptrend. After the stock has advanced, it will need some time to consolidate the gains before resuming higher.
Base n’ Breaks may occur below previous highs during severe market corrections. After an EMA Crossback, there may be another retest of the moving averages as the stock moves up the right side of a larger base.
Sometimes, Base n’ Breaks align with a previous high as the stock pauses before making new highs. These pivots will form in alignment with a more traditional base, like the cup and handle or a longer-period basing pattern.
Base n’ Breaks often occur when the stock is already at new highs. The strongest stocks will only pause for a couple of weeks, appear extended, and then continue even higher.
Symbol: NIO
Company: NIO
Year: 2020
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Trading The Base n’ Break
When Oliver Kell discovers a leading stock, he always tries to find a way to start a position. Buying the strongest stocks often means they will become extended and challenging to get into.
Putting It Together
The Base n’ Break offers an area to buy or add to your position and provides a way to time the intermediate-term trend.
Symbol: STRL
Company: Sterling Infrastructure
Year: 2023
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A Base n’ Break can form near previous highs and as a stock already appears extended. As the Cycle Of Price unfolds, multiple Base n’ Breaks can be traded, but more importantly, they provide insight into where we are in the trend.
If you are holding a position from lower, consider adding to the strongest stocks. Once the price confirms higher you now have a new area to raise your stop.
When you see multiple Base n’ Breaks you are getting later in the Cycle Of Price. For newer adds, be quick to sell into strength, and begin to look for signs of an Exhaustion Extension.