BOTTOMING FORMATION

BOTTOMING FORMATION from http://theimpatienttrader.blogspot.com/

"BOTTOMING FORMATIONS" have won the prize hands down during stock selection process for best performing and generating the most number of winners! Best part about a bottoming formations: RISK is relatively low on entry but reward is HIGH!

What is a BOTTOMING FORMATION? good question! A BOTTOMING FORMATION is typically the price action ones sees in a stock after a sustained decline: The stock will go a "repair" phase after taking a serious beating. This "repair phase" takes weeks, months or some times years to wash out ALL the sellers from a stock. After a sustained decline, the stock will subsequently move sideways of slightly downwards essentially creating A BASE; Essentially washing out all big sellers: in some cases leaving only late to the party SHORT SELLERS who will eventually have to cover these short positions if/when the stock starts to create HIGHER LOWS and ramp higher, creating an even more aggressive SPIKE in prices.

HIGHER LOWS on increasing volume is a KEY part of spotting bottoming patterns. When spotting a bottoming pattern, make sure to spot HIGH volume activity in the stock as a HIGHER LOW is being created. This will be your cue that something is brewing and "SOMEONE" KNOWS SOMETHING and is buying big blocks of the stock to capture further upside.

STOCKS PRICE ACTION and VOLUME are the only two components to proper chart work and stock selection.