- Understanding stock market trends and patterns is crucial for investors looking to make informed decisions. One such pattern is the ascending base, which can indicate potential bullish action.
- Recognizing an ascending base involves identifying a series of three pullbacks, each higher than the previous, usually within a period of nine to 16 weeks.
- A case study of Ameriprise Financial (AMP) illustrates how an ascending base can lead to significant gains, provided the stock does not trigger any sell signals.
Learn how to identify ascending bases in stock charts and understand their potential implications for your investment strategy. This article provides insights into this bullish chart pattern, using Ameriprise Financial as a case study.
Recognizing Ascending Bases in Stock Charts
An ascending base can occur in both up and down markets, often as part of a market decline. It is characterized by three pullbacks, each higher than the previous, typically ranging from 10%-20%. This pattern usually unfolds over nine to 16 weeks. A stock that can rise against a weak market current, demonstrating strong fundamental and technical outlook, is considered bullish. This is why an ascending base is often a stronger indicator when it forms in a weak market.
Case Study: Ameriprise Financial
Ameriprise Financial (AMP) provides a clear example of an ascending base pattern. The stock had already advanced from a flat base when it made its first dip in December 2020, pulling back 8% from its high. It then climbed to a new high, before experiencing a second 8% pullback in late January 2021. A third pullback of 9% occurred in late February and early March. These pullbacks more or less mirrored minor declines in the S&P 500. Importantly, the stock remained above its 50-day moving average during this period, a positive sign.
The buy point in an ascending base is its highest level, which in this case was 233.91. Ameriprise topped this entry on March 18, 2021, with strong volume. Although the stock dipped below the entry in the following days, it did not hit any sell signals. Subsequently, Ameriprise climbed 15% before its stock chart started to form a flat base, leading to additional gains.
Conclusion
Understanding and recognizing patterns like the ascending base can provide valuable insights for investors. While not a guarantee of success, these patterns can indicate potential bullish action, helping investors make more informed decisions. As the case of Ameriprise Financial demonstrates, an ascending base can lead to significant gains, provided the stock does not trigger any sell signals. However, as with any investment strategy, it’s important to monitor market trends and adjust your approach as necessary.
