Take Seacoast Banking (SBCF) as an example from 2016. After the Donald Trump presidential election win on Nov. 8, bank stocks took off. Florida-based Seacoast joined the bandwagon with a gusher of a move from Nov. 9 to 14, rising as much as 9% during that time frame and clearing an 18.05 handle buy point on a nine-week cup pattern.
The midpoint of the cup was 16.83 (15.85 + 17.80 divided by 2). The handle’s midpoint of 17.38 (16.82 + 17.95 divided by 2) was higher, so it passed. As seen in Seacoast’s case, sometimes, the handle may begin forming slightly above the cup’s left-side high.
The double-bottom base is a bit different. The stock forms a cup pattern, but makes another correction before it reaches new highs. The second bottom usually is lower than the first.
The pattern has a W-shape. The buy point is the middle intraday peak of the W-shape plus 10 cents. Keep in mind that a handle may also form, presenting an alternative entry.
No matter what type of base it is, the stock should pass its buy point in heavy volume. That gives you the confidence big investors are buying as well.
How much volume should you expect? Trading should swell at least 40% above the stock’s 50-day average volume.