price movements

The cup and handle is considered a bullish signal, with the right-hand side of the pattern typically experiencing lower trading volume. The pattern’s formation may be as short as seven weeks or as long as 65 weeks. The security finally broke out in July 2014, with the uptrend matching the length of the cup in a perfect measured move. The rally peak established a new high that yielded a pullback retracing 50% of the prior rally, nearly identical to the prior pattern. This time, the cup prints a V-shape rather than a rounded bottom, with price stalling under the prior high. It ground sideways in a broadening formation that looks nothing like the classic handle for another three weeks and broke out.


Similar to the Relative Strength Index , the stochastic also indicates overbought and oversold conditions of the market. That’s because the price tends to continue its upward move at the beginning, and then reverses direction when bullish momentum declines. Conversely, a reversal is the opposite of a continuation. It usually occurs when the market reaches a top or bottom and begins to lose momentum. Look up the meaning of hundreds of trading terms in our comprehensive glossary.

The pattern’s formation usually signals an impending rise in the stock price. When this pattern comes about a handle is formed on a cup, and most often it is in the shape of a triangle. The ideal position to buy is when the price breaks above the top of the shape taken by the handle. As soon as the price moves out of the handle, the pattern is complete and the underlying asset/stock may rise. However, it can decline as well, which is why a stop-loss is needed.

Identifying the cup and handle chart pattern can be complicated, even if you know what you are looking for. Several things can help you identify this bullish continuation pattern, particularly the shape of the chart pattern. Technical indicators work better when used in conjunction with other signals and patterns.

You need to enter a buy trade on the breakout of the handle’s resistance trend line. In this case, a trader should set the Stop Loss order slightly below the handle’s trendline. A profit target will be at the resistance trend line, connecting two highs of the cup. A Cup and Handle price pattern is a technical chart setup that resembles a cup with a handle. The cup has a “u” shape, and the handle is a slight downward correction. Typically, the “cup and handle” is a bullish pattern and can be considered a continuation and reversal formation.


SAIL was in an uptrend and was undergoing a correction, during which a ‘Cup and Handle’ was forming. Metals were in a strong uptrend too, it’s always good to look at the index a stock belongs to. When a stock has been in an uptrend, it cannot forever move in one direction. There has to be a pullback before the trend continues. From my personal experience, the ‘Cup and Handle pattern’ is more effective on longer time frames like the ‘Daily’ chart.

How to identify the cup and handle pattern

To simply apply the same price target logic to every stock formation in the market sounds a bit off, when you think about it. When you are day trading cup and handle patterns, you must realize that not all handles are created equally. The funny thing about the formation is that while the handle is the smallest portion of the pattern, it is actually the most important. The volume of trade should move along with the price of the stock. As the price of a stock declines, it should drop, too. As the base of the cup forms, the volume should remain lower than the average.

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For traders, chart patterns are critical technical indicators that can help them predict price movements. The cup and handle pattern is one of the most popular forms of technical analysis that signifies a bullish trend. The pattern comprises the cup and the handle and resembles them in appearance. The cup and handle breakout point is when the pattern is complete, and traders can expect a continuation of the price uptrend. For the novice and the experienced trader, this chart pattern can help determine points of entry and exit in a trade. It is a bullish continuation pattern which means that it is usually indicative of an increase in price once the pattern is complete.

Note that a deeper handle retracement, rounded or otherwise, lowers the odds for a breakout because the price structure reinforces resistance at the prior high. When a stock has moved up a lot, selling pressure increases. Institutional investors would want to book profits, this brings the price of the stock down. After the high forms on the right side of the cup, there is a pullback that forms the handle. The handle is the consolidation before breakout and can retrace up to 1/3 of the cup’s advance, but usually not more.

The price then rebounds, testing the previous high resistance levels, after which it falls into a sideways trend. In the final leg of the pattern, the price breaks through the resistance level, soaring above the previous high. This is useful when trading both the cup and handle and the inverted cup and handle, because you can speculate on upward or downward price movements. We’ll use a 20-period exponential moving average (EMA-20).

Picking a Target Price or Profitable Exit

That chapter gives a https://topforexnews.org/ review of the chart pattern, compared to what is described below. The Opening range Breakdown One of my favorite day trading setups is an opening range breakdown on a morning gap. What I look for in the ORB is a strong gap down with larger than normal volume…. In this example, the stock RHI had a nice bottom that formed into a deep cup. The important item to note is that the right side of the cup cut through the Ichimoku cloud and even made an attempt at trying to move beyond the cloud itself.

cup pattern

If you’re day trading, and the target is not reached by the end of the day, close the position before the market closes for the day. If the stop-loss is below the halfway point of the cup, avoid the trade. Ideally, it should be in the upper third of the cup pattern. If the price oscillated up and down several times within the handle, a stop-loss might also be placed below the most recent swing low. This pattern can occur both in small time frames, like a one-minute chart, as well as in larger time frames, like daily, weekly, and monthly charts. Market seems to be respecting the demand zone for GbpCad.

Depending on your style there is an indicator for everything. And you can try them all out if you like to see which ones work with your strategy. For me, the Nadaraya Watson Estimator – based indicators are very helpful. Get as much computing power as you can afford as indicators will tax your processor especially on lower time frames and longer bar counts.

FAQ: Frequently Asked Questions about the Cup and Handle Pattern

You deserve more than just random trades and guessing games. The discovery of the internet changed the world forever. And I truly believe the discovery of our Cup With Handle Pro indicator will mark an important milestone in your trading career. You can also adjust the sensitivity level to suit your preferred trading style. Because of these astonishing facts, the researchers over there ranked Cup with Handle the #3 out of the 39 high-probability pattern they tested. All information is subject to specific conditions | © 2023 Navi Technologies Ltd.

  • This indicates that the market’s bullish sentiment is starting to fade, as the bulls are no longer strong enough to push the price up significantly.
  • So make sure you don’t forget to place a stop-loss order above the top of the handle.
  • This e-book provides an in-depth analysis of the pattern and how you can use it to trade with greater success.
  • As you can see from the above example, the cup is really a rounding of price action near a series of lows.

And just incase the trade still did not go my way, there was always a stop loss. From here, I kept a trailing stop loss and continued to ride the stock. Update it to the latest version or try another one for a safer, more comfortable and productive trading experience. According to coinmarketcap.com, there are more than 9250 different cryptocurrencies.

How To Trade the Cup and Handle Chart Pattern

Let me remind you that the inverted https://en.forexbrokerslist.site/ and handle breakout is only confirmed when the price action closes below the support line. You should keep in mind that this pattern can also act as a bullish continuation pattern that marks the beginning of a new uptrend. It’s a continuation pattern that signals a potential BIG market move in direction of the underlying trend.

Imagine having a reliable strategy that tells you exactly which direction to follow every time the pattern develops. Now, let’s revisit the same chart using the logic of selling the supply or upper resistance line on the chart. The breakout should produce significant volume and price expansion. After purchasing, you’ll fill out a short form that asks for your Tradingview username.

The rise leading to the cup with handle begins at C and reaches the left cup lip at point A. Since this is on the weekly scale, the price chart appears narrower than usual, but price rounds downward forming a cup with the right cup lip at B. The handle lasts a few weeks before price begins moving up. The next week, price rockets upward about seven points. Per the risk-reward ratio for a trader, profit targets determine the reward aspect. The cup and handle pattern target generally requires adding the height of the cup to the breakout point in the handle.

His backtesting showed uptrending handles often lead to cup and handle pattern failure. So I don’t go on the hunt for the cup and handle pattern. But — and this is super important — a lot of traders do. Now you have another chart pattern in your tool belt to study. The cup and handle is one of the classic patterns that every trader should know.

It is a prediction that the https://forex-trend.net/’s price will move upward following a breakout. First described by William O’Neil in his book ‘How to Make Money in Stocks’ in 1988, the formation of this chart pattern depicts a good buying opportunity. The cup and handle is a powerful and reliable chart pattern of technical analysis that frequently leads to big gains. As such, it is one of the top chart patterns we consistently target in our flagship stock and crypto swing trading services. Another related technical analysis indicator to keep in mind is an inverted cup and handle pattern. Some traders consider that pattern a harbinger of a downtrend in the asset’s price that helps identifying selling opportunities.

When this part of the price formation is over, the security may reverse course and reach new highs. Typically, cup and handle patterns fall between seven weeks to over a year. The cup is formed as the price consolidates in a small range following a sharp decline. This consolidation forms the “handle,” which is typically a shorter-term downtrend. Investors typically trade an inverse cup and handle by selling when the price breaks below the handle.

Near the 52-week high is ideal, but #2 below is also okay. In order to prevent a false signal, it’s important to receive cup and handle pattern confirmation before buying. Use this simple, 10-step checklist below to discover how to identify a cup and handle pattern—the right way.