Cup With Handle Pattern

A half cup is when the handle occurs in the upper half of the cup but below the prior high. Volume ideally drops off during the consolidation, or has at least one or more really low volume days . Price moves up again and forms a consolidation in the middle to upper portion of the triangle . If the consolidation is taking up most of the triangle, which is now quite narrow, that is also fine.
price rally

  • The price tends to rebound when it hits the support trendline.
  • Bulls then start coming in and take the price to the previous high.Bears come in again and push the price lower.
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Technical traders using this indicator should place a stop buy order slightly above the upper trendline of the handle part of the pattern. In between trading stocks and forex he consults for a number of prominent financial websites and enjoys an active lifestyle. Your position is not random or based on how strongly you feel about a trade or stock. It is based on the difference between your entry and stop loss, your risk tolerance, and the amount of capital you have. After the drop the price levels off and starts to rise again. No BS swing trading, day trading, and investing strategies.

How this indicator works

In this case, it is wise to use the smaller height and add it to the breakout point for a safer target. Traders can also use the larger height to achieve a more aggressive target. An ideal trade would be to ensure a handle occurs within the upper half of the cup. An intelligent trader would place a stop-loss order in a way that it doesn’t end up in the lower half of the cup formation.

At this point, an investor may purchase the, anticipating that it will bounce back to previous levels. The stock then rebounds, testing the previous high resistance levels, after which it falls into a sideways trend. In the final leg of the pattern, the stock exceeds these resistance levels, soaring 50% above the previous high.

Another issue has to do with the financing your home business of the cup part of the formation. Sometimes a shallower cup can be a signal, while other times a deep cup can produce a false signal. Sometimes the cup forms without the characteristic handle. Finally, one limitation shared across many technical patterns is that it can be unreliable in illiquid stocks.

That’s quite a few things that need to transpire to trigger a trade, but this pattern occurs quite often and can provide ample trading opportunities throughout the year. Cup and Handle patterns can be stronger when the next logical place of resistance on the chart after the breakout is a considerable distance away. The power of a Cup and Handle lies in the fact that after hitting overhead resistance from the prior swing high, a very minor correction is put in.

What does a cup and handle pattern mean?

Imagine having a reliable strategy that tells you exactly which direction to follow every time the pattern develops. DTTW™ is proud to be the lead sponsor of TraderTV.LIVE™, the fastest-growing day trading channel on YouTube. Second, the cup section should look like a U even from a distance. This means that the bottom should be a bit rounded and not like a V. This is because the latter is usually considered a very sharp reversal. Get Started Learn how you can make more money with IBD’s investing tools, top-performing stock lists, and educational content. IBD Videos Get market updates, educational videos, webinars, and stock analysis.

The increased selling pressure pushes the price lower to retest the support level. An inverse cup and handle pattern is the exact opposite of what we have talked about. The pattern happens when the price of an asset is declining. The cup and handle pattern is called so because of its appearance. When looked at closely, it looks like a cup with a handle.

It shows the price found a support level and couldn’t drop below it. It helps improve the odds of the price moving higher after the breakout. A rounding bottom is a chart pattern used in technical analysis that is identified by a series of price movements that graphically form the shape of a “U.”

An upward-sloping handle is flawed; it represents weak demand as new buyers move into the stock at a trickling pace. During the stock’s actual breakout, you want to see a new wave of buyers coming in at a torrid pace, not a trickling one. The handle should also show a downward slope along at least a portion of its price lows, not an upward one.

Examples of common reversal patterns in technical analysis include head and shoulders, double bottoms, and bump-and-run patterns. This upside-down cup pattern works the same way as the cup and handle pattern, except that the breakout direction is downward instead of upward. In this article, you’ll learn how to trade the inverted cup and handle step by step so that you can maximize your profits while minimizing your risks. Trading the cup-and-handle pattern is one technique that stems from what is known as technical analysis. But the main alternative to this type of analysis is fundamental analysis.


So the next time you’re planning to trade the cup and handle, make sure you look at how much volume has been traded during the decline. The stochastic oscillator is a momentum indicator that uses two moving averages to compare the current price to previous prices. Your ideal profit target for this setup can be the same as the height of the cup part of the formation. You should keep in mind that this pattern can also act as a bullish continuation pattern that marks the beginning of a new uptrend. The pattern is complete when the price breaks below the support line. This signals the end of the uptrend and the bears are coming.

Strategy #1 – Riding With The Trend

The pattern begins after a well-liked stock rallies to a new high following a positive fundamental development. As the stock surges investors feel increasingly comfortable paying higher prices but there comes a point when the “story” of the stock fails to convert new believers. Slowly, the stock begins to drift lower as those seeking to lock-in profits outnumber those intrigued by the story. The figure on the right shows an example of a cup with handle chart pattern. The rise leading to the cup with handle begins at C and reaches the left cup lip at point A.


Even if all other parameters come together, you should avoid stocks that break out below their 10-week moving average. Hartalega As Topglove And supermx possible forming a triangle BUT a variant as cup and handle or VCP pattern. TRX had a similarly Bullish ABCD BAMM Pattern on the FTX chart but that has since played out and gotten shut down. Seeking long position for about 120pips for a nice risk to reward. Market could possibly push for over 250pips for a tp2 from this zone if you want to swing trade entry.

Once a stock has completed its recovery and begun to stabilize or turn down slightly, the pattern is almost complete. At this point investors expect it to remain stable for a period of time before resuming its previous growth. This means that the handle of a cup and handle is considered a strong indication that the stock is poised for growth. This is an inverted form of the cup and handle pattern that forms in a downtrend. As with the classical cup and handle platform, the inverse one represents a consolidation in a trend, but this time, in a downtrend.

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But don’t worry, we’ve prepared an easy 10-step checklist to help you identify a valid cup and handle pattern. Not every chart that looks like this is a PROPER cup and handle pattern. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate.

A handle can form anywhere between mid-cup and above cup . Look for a high point, a drop, and then a rally back toward the high. Ideally, there are two drops, with the second smaller than the first. We’ll talk about scanning for these patterns at the end of the article. No strategy is complete without understanding position sizing, so check out the How Much Stock to Buy article for a full explanation.

The stock then breaks out past resistance which can be a sign that demand for the security may be increasing. One of the comments from yesterday’s “After Hours” article was a question about the identification and validity of a pattern. I felt that the reader was correct in identifying this pattern and warranted an explanation of how to incorporate this pattern into the current price action in gold.

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