The Foldback Technique: How Gary Glover Reads a Stock's Base-Building Sequence After a Vertical Decline
Written by Christopher Hall, AdvDipFP | Authorised Representative, AFSL 526688 | Updated September 2026
Analysis sourced from Gary Glover (AR 259215), Authorised Representative, Novus Capital Limited (AFSL 238 168)
ASX stock base building follows a recognisable sequence once a stock's decline actually stops — and Gary Glover's foldback technique is a method for anticipating that sequence by tracing the stock's own decline path in reverse. Gary Glover, who reviews ASX momentum stocks in a recorded weekly session with Finer Market Points, applied the technique in the 15 September 2026 session to Xero (ASX: XRO) and REA Group (ASX: REA), two growth names working through the aftermath of a sharp fall from a vertical advance. This guide covers what a genuine base looks like, why a stock tends to retrace to the origin of its last major advance, the wash-out-low-then-higher-lows sequence that typically follows, and what the broader research says about which base-builders actually go on to lead.
Gary Glover explains the foldback technique for reading ASX stock base building, applied live to Xero and REA Group in the 15 September 2026 session.
What Does It Mean for an ASX Stock to Build a Base After a Decline?
Base building is a period of price consolidation in which a stock trades within a defined range after a prior advance, allowing supply to be absorbed and setting up the conditions for a subsequent breakout. Sound bases show contraction in price volatility and declining volume during consolidation — a concept central to both William O'Neil's CAN SLIM methodology and Mark Minervini's Volatility Contraction Pattern (VCP) framework.
The distinction matters because a stock that is still falling and a stock that has genuinely stopped falling can look similar for a few weeks at a time. According to O'Neil/IBD/MarketSmith research, approximately 90.77% of stocks breaking out of proper bases in bull markets went on to produce meaningful gains — but that figure describes stocks breaking out of a completed base, not stocks merely pausing mid-decline. The base has to actually finish forming first, and that is where Gary Glover's foldback technique is aimed: reading whether a stock is doing the work of a genuine base, or simply resting before another leg down.
Remember that past performance is no guarantee of future results, and all trading involves risk.
Why Does a Stock Retrace to Where Its Last Advance Began?
Gary Glover's anecdotal observation, developed across his trading career, is that a stock coming off a long, multi-accelerating-trend-line advance typically retraces all the way back to the level where that advance's last drive began. This is a practitioner observation, not a formal study. The logic Gary applies: the final leg of a strong advance is usually built on the thinnest conviction — new buyers arriving late, with the least invested reason to hold through a reversal — so when the decline comes, price tends to travel back through that entire leg before finding real demand again, at the level where the advance began — see FMP's guide to vertical trend trading and sector rotation for why these advances accelerate the way they do.
"Normally, most of the time you'll come back to where the last drive of this bull market sort of started." — Gary Glover, 15 September 2026 session
Gary applied this directly to Xero (ASX: XRO) in the 15 September 2026 session, reading its retracement as having reached the $62–63 zone — the level where the stock's last bull-market advance began. He calls the broader method of tracing a stock's decline path and expecting a similar path back out on the recovery the "foldback technique." The same session touched the wash-out/spring-low mechanism this retracement typically produces — a concept with roots in the Wyckoff spring and secondary-test pattern, which the technique leans on directly.
What Does the Wash-Out-Low-Then-Build Sequence Look Like?
A stock rarely turns in a clean V-shape; instead, it typically undercuts its retest level in a wash-out low, recovers, retests that zone, and then builds a sequence of higher lows before it is ready to trend again. Gary Glover's anecdotal observation is that this sequence clears out the last weak holders before genuine accumulation can begin — the visible evidence of that clearing is the higher-lows pattern itself, covered in full in FMP's guide to the 0-1-2-3 base.
"You're not just going to come out of this V-shape. You're going to do a little bit of work here first." — Gary Glover, 15 September 2026 session
Gary illustrated the sequence with a historical example from his own trading career: ResMed (ASX: RMD) went through a heavy decline that required three to four consecutive higher lows to build before its advance resumed. Remember that past performance is no guarantee of future results, and all trading involves risk.
The two live examples from the 15 September 2026 session show the same mechanism working through two different chart shapes:
Stock | Prior advance | Where it retraced to | Base shape Gary identified |
Xero (ASX: XRO) | Vertical run into early 2025 | $62–63 zone — origin of the last bull-market drive | Wash-out low, expected retest, then a build of higher lows |
REA Group (ASX: REA) | Vertical advance, then a sharp decline | Prior support zone, retested from above and below | Inverse-head-and-shoulders-style base, using the same foldback logic |
Gary's own caveat on REA Group's shape: he is "not a massive fan of the head-and-shoulders pattern" as a standalone signal, but treats the inverse version here as one more piece of evidence for a genuine base rather than a standalone trigger — consistent with reading several confirming signals together rather than any single pattern in isolation.
The FMP Momentum Profile — accessible to FMP YouTube Momentum Profile members — included relative-strength readings at the time of the 15 September 2026 session, giving members early access to the educational data discussed in this article.
Which Stocks Actually Lead Once a Base Completes?
Research on relative strength suggests the base-builders holding the strongest relative strength into the low are the ones most likely to lead a recovery — but only once the broader market has actually turned. In a bull market, Bulkowski's research found the highest-ranked stocks by relative strength returned 52% over two years, against 32% for mid-ranked stocks (2002–2005, 472 stocks) (Bulkowski, thepatternsite.com). The same research shows that when a market resumes an uptrend following a correction, stocks with the highest prior relative strength tend to recover first — suggesting momentum leaders are often the first signal that a broader recovery has genuinely begun.
The caveat matters as much as the finding. Across a full market cycle including a severe bear market, Bulkowski found no meaningful difference in two-year returns between the top, middle and bottom relative-strength groups — each returned approximately 20% (1995–2005 dataset). A high-relative-strength stock building a base in a market that has not yet turned is not the same signal as one building a base after the broader market resumes an uptrend — the market condition, not the base alone, decides which reading applies. Many bases of this kind, once genuinely complete, resolve into the tighter Volatility Contraction Pattern (VCP) structure momentum traders look for at the entry point itself.
Conclusion
Base building is a process, not a single event: the zone where a stock's last advance began is the level Gary Glover watches first, the wash-out-then-higher-lows sequence is the visible evidence that a genuine base is forming, and relative strength into the low is informative only once market conditions actually support a broader recovery. Whether Xero and REA Group go on to complete the higher-lows sequence Gary described in the 15 September 2026 session, or instead fail to hold the wash-out low, is not something this article predicts — only something worth watching for. The supporting Momentum Profile data from the 15 September 2026 session is accessible to FMP YouTube Momentum Profile members.
The analysis in this article draws on Gary Glover's recorded session and the FMP Momentum Profile data, which is published daily and accessible to FMP YouTube Momentum Profile members. Members receive early access to the educational data that forms the basis of articles like this one. For information on FMP YouTube Momentum Profile membership, visit the Finer Market Points membership page.
Frequently Asked Questions
What is the foldback technique in stock chart analysis?
The foldback technique is Gary Glover's anecdotal method of tracing a stock's decline path to anticipate the shape of its recovery — reading the way a stock fell as a guide to the level and pattern it is likely to trade back through on the way up. It is a practitioner observation developed across his trading career, not a formal study, and is typically applied alongside the wash-out-low and higher-lows sequence described above.
How do I know if a stock's decline has actually stopped?
No single signal confirms it. Gary Glover's anecdotal observation is that a genuine stop typically shows a retracement to the origin of the stock's last major advance, followed by a wash-out low, a retest, and a sequence of higher lows — rather than a single sharp bounce. A stock still falling generally has not completed that sequence.
What is the difference between a wash-out low and a stock still falling?
A wash-out low undercuts a prior retest level and then recovers, typically on lighter volume than the initial decline — a signal that the last weak holders have sold. A stock still falling continues making new lows without that recovery, and without the higher-lows sequence a genuine base requires.
When does a base become a genuine setup rather than a value trap?
Gary Glover's anecdotal observation is that a base is closer to a genuine setup once it has completed a sequence of higher lows following the wash-out low, rather than immediately after the first bounce off a low. Research on relative strength also suggests the broader market needs to have turned before a base-builder's relative strength becomes a reliable leading signal, rather than a false start.
Why do some base-builders never recover their prior highs?
A stock can complete a technically sound-looking base and still fail to lead if the broader market has not resumed an uptrend, or if the original catalyst behind its advance no longer applies. Bulkowski's research found no meaningful relative-strength advantage across a full market cycle including a severe bear market — a reminder that a base pattern alone does not guarantee a recovery.
What tools help identify a stock in the base-building phase?
The FMP Momentum Profile — published daily and accessible to FMP YouTube Momentum Profile members — tracks relative-strength readings of the kind referenced in this article, alongside the broader momentum data Gary Glover reviews in his weekly session.
Sources
# | Source | Type |
1 | Gary Glover, Finer Market Points session, 15 September 2026 | Practitioner session |
2 | William O'Neil, How to Make Money in Stocks (2009) | Published research |
3 | Thomas Bulkowski, thepatternsite.com (relative-strength datasets, 1995–2008) | Published research (practitioner, not peer-reviewed) |
All Gary Glover observations in this article are anecdotal practitioner observations developed across his trading career — not formal studies.
Related FMP Educational Resources:
The 0-1-2-3 Base: How Gary Glover Reads Four Consecutive Higher Lows for an ASX Bottom — Christopher Hall
Understanding Vertical Trends and Sector Rotation: Advanced Trading Lessons from ASX Growth Stocks — Christopher Hall
Wyckoff Springs ASX Trading: Complete Educational Guide for Australian Markets — Christopher Hall
This article includes a general trading observation made by Gary Glover (AR 259215), Authorised Representative of Novus Capital Limited (AFSL 238 168), during a recorded Finer Market Points session on 15 September 2026. The observation reflects Gary Glover's general approach and his anecdotal observations developed across his trading career — it is general commentary only, and is not a formal study, not financial advice, and not a recommendation to trade any security. It was made in the course of that session and not in response to any individual's circumstances. Content has been edited and summarised by Finer Market Points for educational purposes.
This content is for educational purposes only and does not constitute financial advice. Past performance is no guarantee of future results.
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