The first point to clarify is that “”resetting the base count”” does not
mean you can buy a stock that’s rising out of the bottom of a base.
After a stock goes through a correction, whether major or minor, you
should wait until it breaks out near its old high before considering a
purchase.
In general, you should start recounting bases after a major correction
that is usually the result of a bear market. A quality stock may correct
40%, 50% or 60% over a number of months, thereby clearing the
slate for a new advance once the market improves.
Stocks that collapse 80% to 90% or more, however, may be damaged
beyond repair. You’re probably better off avoiding them.