The ascending base usually forms during times of short- or intermediate-term weakness in the general market. This occurs in a stock that's already come out of a cup with handle and attempts to continue advancing despite the market's short-term pullbacks in price. The main characteristic of the ascending base is that the stock makes a series of three higher price peaks, each followed by a brief drop in price for a week or two during the weak market. All the while, the stock stays within an ascending price pattern along each of the 3 low points.

This pattern usually lasts 10 to 12 weeks and generally shadows the market's weak spells. Once the overall market clearly turns up for certain, the stock breaks out as the selling pressure evaporates and professional buyers rush back in. The ascending base reflects not only a stock that's defying a short- or intermediate-term market slump, but one also benefiting from three shakeouts (Periods of heavy selling by investors losing faith in a stock and scared out by the declining market averages).

• Above, you see America Online in an uptrend until hitting a plateau in late 1998 (point 1).
   
• From there, the stock made three peaks and three drops. All the while, the major market indexes were in full retreat (point 2).
   
• Then in the middle of March, as the general market began recovering, the stock started making new price highs—moving from about $90 to $110—as volume grew (point 3).
   
• America Online—the No. 1 Internet service provider and a cyberspace powerhouse that went on to make a takeover of Time Warner—jumped to around $170 in about a month.

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