Qualifying Distribution within a Base

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Qualifying Distribution within a Base is a technical concept that I use to supplement traditional base analysis.

In traditional base analysis, accumulation/distribution counts are one of the benchmarks used to determine a stock's health.

Generally speaking, if a stock has more accumulation than distribution weeks within its base, it's considered a positive for the stock.

Conversely, if a stock has more distribution than accumulation weeks within its base, it's viewed as a negative for the stock.

However, there have been many stocks with negative or neutral accumulation/distribution counts that went on to achieve solid gains.

With this in mind, how can base analysis be improved to help you?

One answer may be to use a qualification process that helps assess the significance of distribution within a base.

To qualify distribution within a base, you must have the following conditions present:

1. Base showing more distribution than accumulation or an equal (neutral) amount of distribution and accumulation during a stock market uptrend.
2. Weekly price thrust on heavy volume within prior uptrend (price should close in the upper half of the week's range).

Notes:

• The price thrust volume (prior uptrend) is used as a standard or benchmark against the distribution volume within the base.
• The price thrust high and low (range from the prior uptrend) should be close to the base trough or ideally, anchor/support the base's trough.
• Liquid stocks should be reviewed over low-priced/illiquid stocks.
• There may be other factors that you can add (ex. 1st correction of market uptrend) to the base qualification process that may help support a positive outcome for the base.

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