Basing

The process of which a stock “consolidates” within a range. In other words, it fluctuates between a range with an upper and lower boundary. This range may be narrow or wide relative to the stock price and is usually visual via a chart.

A stock may base after a sharp decline before bottoming, but a stock in a sharp downtrend usually forms a few bases and breaks the lower boundary. Thus it is not safe to assume that a stock must be at a bottom when it is basing.

A stock in an uptrend often bases before continuation of the uptrend. Breakouts of a base may be offer a good place for traders to enter a position, but not all breakouts succeed.

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