Cup And Handle Pattern

However, the market could do a False Breakout and you are long the highs. Because this is a sign of strength telling you there are buyers willing to buy at these higher prices. Now, that’s fine if the price made a strong momentum move into Resistance and it gets rejected strongly. But, if you noticed that the price is holding up nicely at Resistance, then it’s a sign of strength as it tells you buyers are willing to buy at these higher prices.

Should I use a stop or limit order?

If the stock is volatile with substantial price movement, then a stop-limit order may be more effective because of its price guarantee. If the trade doesn’t execute, then the investor may only have to wait a short time for the price to rise again.

Hence, TradeVeda may be compensated for referring traffic and business to other websites/products. When trading this pattern, it is essential that you allow for the Cup and Handle Pattern’s construction to complete before trying to make any trades using it. If you do not do this, you stand the risk of having made an inaccurate call that could cost you a lot of money when the trade goes against you. The Cup and Handle Pattern is beyond doubt one of the most reliable chart patterns out there, but it does have its own set of strengths and weaknesses.

Want To Know Which Markets Just Printed A Cup And Handle Pattern?

A cup-and-handle pattern, illustrated below, is considered a bullish trading trend. It represents a consolidation period for a strong asset, during which traders move away from a stock, which is generally growing well. After this short-term consolidation the stock recovers its lost value and resumes its previous growth. To identify the cup and handle pattern, start by following the price movements on a chart.

What happens after a cup and handle pattern?

It occurs when there is a price wave down, followed by a stabilizing period, followed by a rally of approximately equal size to the prior decline. … A continuation pattern occurs during an uptrend; the price is rising, forms a cup and handle, and then continues rising.

From there, prices drifted sideways as the weak hands were shaken out. Once the weak hands are removed, then the void of sellers allows for price to fly higher like cup and handle pattern it did in this case. Technical analysis focuses on market action — specifically, volume and price. Technical analysis is only one approach to analyzing stocks.

Cup With Handle: Example

Or the pre-cup chart illustrates why some of those who had invested in JBL were ready to take their profitable exit. As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for four days to four weeks. No one can explain how to trade cup and handle pattern better that way you have explained in this short article.

If you’re long, you want to exit your trades before the swing high or Resistance. And usually, you exit your trades just before the opposing pressure steps in. With this in mind, you can trail your Balance of trade stop loss on the previous swing low because if the market wants to continue higher, the previous swing low shouldn’t be “broken”. For a trend to continue higher, it MUST make higher highs and lows.

Cup And Handle Patterns In Stocks

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. The Cup with Handle is a bullish continuation pattern that marks a consolidation period followed by a breakout. It was developed by William O’Neil and introduced in his 1988 book, How to Make Money in Stocks. A cup and handle is a bullish technical price pattern that appears in the shape of a handled cup on a price chart. At the end of June 1998, a share of its stock had been worth $8.27.

  • I show this as the blue line extending down from point A on the chart to the right.BuyBuy when price closes above the right cup rim .StopThe handle low is a good place to put a stop.
  • Rayner your knowledge has helped me in finding Trends & how to trade charts.
  • The trade volume should decrease along with the price during the cup and should increase rapidly near the end of the handle when the price begins to rise.
  • In this case, the cup shape is inverted such that it represents a resurgence in price after a downtrend followed by a downward movement.
  • In this situation, she can measure the height of the cup according to either lip, looking for a more or a less aggressive target.

A bull is an investor who invests in a security expecting the price will rise. Discover what bullish investors look for in stocks and other assets. A trader might want to act on a cup and handle pattern in which the first lip of the cup is somewhat lower than the second. In this situation, she can measure the height of the cup according to either lip, looking for a more or a less aggressive target. Thanks man , one of the best articles on trading the cupnhandle pattern.

Diamond Chart Pattern: How To Trade It Best Explained Step

This increase in volume verifies that selling pressures have been satiated. As forex traders, we are constantly pressured to make profits that we sometimes lose sight of the importance of sticking to the trading plan or practicing proper risk management. A chart pattern is a graphical presentation of price movement by Over-the-Counter using a series of trend lines or… The price target following the breakout can be estimated by measuring the distance from the right top of the cup to the bottom of the cup and adding that number to the buy point. Trading the cup-and-handle pattern is one technique that stems from what is known as technical analysis.

We also offer a chart scanner with pattern recognition software that works automatically to detect and highlight trends for your ease of trading. A is formed when there is a price rise followed by a fall. The price rallies back to the point where the fall started, which creates a “U” or cup shape. The price then forms the handle, which is a small trading range that should be less than one third of the size of the cup. It can be horizontal or angled down, or it may also take the form of a triangle or wedge pattern​.


The perfect pattern would have equal highs on both sides of the cup, but this is not always the case. Price persistence is the tendency of a security’s cost to continue moving in its present direction. You can watch the video on the pre-breakout as I believe it’ll answer your question. If you’re entering on the 4-hour timeframe, then a factor of 6 would be, 4 multiply by 6, which gives you 24 hours, and that’s the daily timeframe.

The can take between 30 to 50 candles to form on any given time resolution. The cup and handle pattern occurs in both small time frames, like a one-minute chart, and in large time frames, like daily, weekly, and monthly charts. It occurs when there is a price wave down, followed by a stabilizing period, followed by a rally of approximately equal size to the prior decline. It creates a U-shape, or the “cup” in our “cup and handle.” The price then moves sideways or drifts downward within a channel—that forms the handle.

How To Use The Cup And Handle Pattern?

We provide content for over 100,000+ active followers and over 2,500+ members. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step Major World Indices rules to follow. Let’s get a little bit deeper into what Cup and Handle is, and how to make money trading with the profitable cup and handle trading strategy. The Cup with Handle trigger signal is at the break out of the handle.

What is buy point for a stock?

A “buy point” for a stock is a range or price at which an investor or trader will agree to enter/purchase a stock position. This is commonly based on two general forms of evaluation: the fundamental value of a company’s stock or the price of the stock relative to it technical price trading ranges.

The pattern gets its name from its appearance that resembles a teacup with a handle. The is a bullish continuation pattern that consists of two parts, the cup and the handle. The cup typically takes shape as a pull back and subsequent rise, with the candlesticks in the center of the cup giving it the form of a rounded bottom. The handle is made up of downward-sloping price action that soon breaks out above the upper resistance line to indicate the continuation of the original bullish trend. Cup and handle patterns are also traded in the forex market, especially by day traders​​.

Cup And Handle Pattern Trading Strategy Guide

In this case, traders may focus on stocks or indexes that saw strong percentage advances heading into the Chart patterns occur when the price of an asset moves in a way that resembles a common shape, like a triangle, rectangle, head and shoulders, or—in this case—a cup and handle. They provide a logical entry point, a stop-loss location for managing risk, and a price target for exiting a profitable trade.