I read recently in IBD that both DE and JOYG have now reset their base counts because the base pattern they are both in now shows the low undercutting the low of the previous base.  However, neither stock had any kind of run up from the previous base.  Is this correct?  For the purpose of counting bases, a “base on base” pattern is counted as one base on the way up.  But if it occurs as a base on base pattern and the second base undercuts the low of the first base without a 25 % run between then it is counted as a reset?  Does not seem right to me.  Look at the charts on a weekly, say either one completes the base.  The price would then have to be close to a new high in order to form a proper base.  Still looks like they had a huge run to me…..

Now this could easily become a mute point if the correction goes further and turns into a bear market and all base counts get reset.

But back to the original question.  Does a base on base pattern where the second base undercuts the first but price has no run-up between them qualify as a base reset?

Thanks, Don

Hi Don/All,

Don, if you would please, take a few moments and mark up how you see each chart. What I see might not be what you do. I have not followed these two since about 2006 and therefore don't have them currently annotated.

I will be happy to comment on you're interpretations and trust others will add as well.

-Enjoy,

Tom

I think you may be confusing some rules here.  For a new base to form a stock has to rally 20% or more.  If  it rallies less than that and the stock forms a new base then that base is a "base on base".  A reset is a reset.  Any base that breaks out and then the bottom of that base is taken out is a reset.  See this discussion.  NETL and CRM both reset after moving up only a few percent after their break outs.

http://community.marketsmith.com/telligent/b/blogs/archive/2011/5/20/6277.aspx

Not sure what rules I am confusing... Not sure I said anything different then in your post.  Don