When is a cup not a cup? That's not a setup for a joke; it's a setup for gains with the saucer base.
To oversimplify things, a saucer base is just a fancy name for a long cup base.
Do not be fooled into thinking that this distinction means a saucer base is not as worthwhile as a cup base. Different does not mean that it is "less-than." While the added time can be frustrating to those already holding a stock, it's not a factor for those buying on a breakout.
Once a stock clears a proper buy point in volume, the saucer base is just as bullish as any other pattern.
How To Invest: What Is a Saucer Base?
Though it can technically be as short as seven weeks, most saucer bases develop over months or even years. Long or short, the defining trait of a saucer base is the shallow look it has when compared with a cup base.
The depth of a saucer base can even exceed 33%. But spread across months and years, that kind of correction looks far less severe. Conversely, a 20-week base could be considered a saucer base if its depth is no greater than 16%.
Like cup bases, saucers may also form handles. If a handle doesn't form, you can use the left side high of the pattern to find your buy point. And like cup bases, saucers are more likely to succeed when they do have a handle. The handle provides that last shakeout of nervous investors. Look for the handle to form above a stock's 10-week moving average for best results.
Being an uncommon type of base, saucers exist primarily to remind investors to not discount the slow movers they may encounter when screening for opportunities. Keep those stocks with saucer bases on your ready list because they can break out just as well as any cup can.
How To Invest: Gilead Sciences' Saucer Base
Gilead Sciences had a wild ride since the pandemic began. At the end of 2021, the developer of respiratory therapeutics still had a lot of ground to make up when it began another pullback.
Although it looked like a cup base, the decline of 23% and length of 42 weeks is why IBD MarketSmith pattern recognition identified the pattern as a saucer (1).
In late October 2022, things were finally turning around.
The stock broke out the week ended Oct. 28, 2022 with a staggering 16% move (2).
Though the saucer took over 10 months to form, Gilead returned a 20% gain from the 74.12 buy point in just six weeks. Gilead is now forming another long, shallow base.
