What Is Cup And Handle Pattern

November 24, 202210:46 am


The reflection of human emotions is seen in the chart and the formation of the handle takes place. DTTW™ is proud to be the lead sponsor of TraderTV.LIVE™, the fastest-growing day trading channel on YouTube. The price then started to decline and reached a low of $1050 in October 2015.


The stop loss order will prevent you from making losses, which can wipe out your trading account. This is a great opportunity for you as a trader to go long. The cup and the handle have been shown using blue lines. This will give you an opportunity as the trader to go long. The bottom or top of the pattern is rounded, hence, you should use a rounded drawing tool.

price moves

Our first strategy for the cup and handle price pattern is to enter just before the completion of the pattern, during the handle formation. You have a sell signal when the price breaks below the lower trend line of the price channel that forms the handle. There should be a spike in volume when this breakdown happens. You may go short at the close of the breakdown candlestick, or you place a stop sell order slightly below that lower trend line.

Trading the bullish Cup and Handle pattern

But if I gave you only “buy here, sell here” I’d be doing you a great disservice. 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. If you’re not ready to take on the live markets, you can open a risk-free demo account to identify the cup and handle pattern and practice your trades. 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 all know by now, you must place a trade after the stock breaks out of the resistance level and closes above it for a few days.

  • Now that you know the psychology behind the formation of the cup and handle pattern, let’s move ahead to understand how can you trade using this pattern.
  • The best place to enter a trade using this pattern is when the handle forms.
  • That’s because the traders who had bought the stock at the left edge thinking that the stock would go up didn’t sell the stock and saw the entire cup formation.
  • So, initially, the stock rallies from Rs. 40 to Rs. 60 to form the left edge of the cup.

As the name implies, a cup and handle pattern looks like a cup with a handle. Most of the same general rules, such as the handle not exceeding 1/3rd of the cup, still apply. The period of consolidation is the U-shaped cup whereas the breakout is signified by the handle. But little did you know…if you had carefully studied the cup from which you drink your tea every day, you would be a millionaire by now. That’s because the tea cup has given rise to a very popular price pattern named the cup and handle pattern. This pattern is one of the most popular bullish continuation patterns which can help you mint money in the stock markets.

Trading Quotes

It’s imperative to know candlesticks along with support and resistance. For example, if you find a cup and handle on 15-minute time frame, it makes sense to go higher to the daily time frame and check which way the stock has been moving. The pattern is confirmed when the price action breaks out of the handle. The reason is that we are dealing with a bearish cup and handle price pattern.

The https://en.forexbrokerslist.site/ and handle indicator has long been used by traders to determine the direction in which an asset/stock may move. Additionally, it clearly defines the entry point, stop-loss, and target placement guidelines. However, it is advised to use this pattern along with other tools to make the most out of the opportunities available on the market. It is interpreted as an indication of bullish sentiment in the market and possible further price increases. The inverted c&h pattern gets its name because of the shape it forms on stock charts. The inverted cup and handle pattern forms an upside down cup and handle.

See that the target has been applied downwards from where the breakout occurs. The price action begins by making a gradual bearish move. The second target is equal to the size of the cup beginning from the moment of the breakout. After confirming the pattern, the price is most likely to break the channel of the handle, starting a bullish move. It begins with a price move in the bearish direction, which reverses gradually. The handle part has been formed by a bearish price move.

The confirmation of this https://forex-trend.net/ happens when the price action breaks the channel of the handle in a bearish direction. The bullish cup and handle chart pattern has been marked using blue lines. If the bullish cup and handle occurs after a bearish price move, it will be considered a reversal pattern.

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In the above chart, we have a bearish cup and handle chart pattern. If you are having a bearish cup and handle formation, you should see a bearish breakout through the handle. If you want to draw a bearish cup and handle chart pattern, take the two bottoms of the pattern then stretch a curved line upwards.

Stop-loss orders may be placed either below the handle or below the cup depending on the trader’s risk tolerance and market volatility. To identify the cup and handle pattern, start by following the price movements on a chart. The pattern starts to form when there is a sharp downward price movement over a short time. This is followed by a period where the price remains relatively stable. Then, there is a rally that is more or less equal to the initial decline. These movements form a ‘u’ shape on the chart – this is known as the cup.

How and When to Enter or Exit This Pattern

If you set your stock scanner to meet your other trading needs, then you can flip through the results until you find a chart that looks like a cup and handle. For example, a day trader may scan for stocks with a high average true range , and a swing trader might search for stocks that have performed well in recent weeks. In addition to the price levels, some traders also look at trade volume in the asset before entering a trade after a cup and handle pattern.

The first place to take your profit has been marked as Target 1. The pattern is confirmed at the position pointed by a green arrow marked as Confirmation. It should also be applied right from the point of momentum breakout.

By learning to recognize them in real time, traders can limit their risks by determining the best points for entry and exit. A double bottom pattern is a technical analysis charting pattern that characterizes a major change in a market trend, from down to up. Technical traders using this indicator should place a stop buy order slightly above the upper trendline of the handle part of the pattern. On the chart above, I’ve drawn three arcs to represent cups. And it’s a good example of a cup and handle pattern failure. The bounce out of the handle was very small before continuing downward.

That means it can become a self-fulfilling prophecy when enough traders see it forming. If the pattern is successful, there’s a good chance for another breakout after the stock passes the cup’s previous high. Remember what I said earlier about O’Neill — the man who made the cup and handle pattern famous? Remember, patterns won’t look perfect all the time, and it’s unrealistic to expect them to do so.


Patterns help us recognize possible upcoming movements so that we can create trading plans to catch moves that fit our strategies. This is used in conjunction with the Stocks Over Coffee Podcast on Technical Education Cup with Handles. Apple is the largest company in the world with a market cap of 2 trillion. This is no easy feat to accomplish but is there a way to get into a small company before it becomes a household name? Looking to see this one play out over a 7 day time frame.

Traders of all levels will love our charts, built-in scans, watchlist capabilities, and so much more. 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. One of the most popular chart patterns is the cup and handle pattern. A cup and handle is a technical chart pattern that resembles a cup and handle where the cup is in the shape of a “u” and the handle has a slight downward drift. O’Neil liked a downward handle as opposed to an uptrending handle.

The https://topforexnews.org/ and Handle pattern can form in any timeframe, but as a swing trader, you should focus on the daily timeframe. To identify the Cup and Handle pattern or the inverse type, you need to understand the price movements that form its structure. For example, being a continuation pattern, there has to be a prior trend before the Cup and Handle pattern forms.

Trading and investing in financial markets involves risk. That’s why we designed StocksToTrade to have such incredible, easy-to-customize charts. You can add in lines for support or resistance, use technical indicators, easily export to review later, and so much more.

The ideal cup and handle pattern sees a pullback of about one third from recent highs. The more significant the dip, the stronger the recovery effort needs to be. The same goes for any pullback on price during the handle formation. Volume is a key indicator of pattern strength on both sides of the cup formation. Look for gradual pullback in volume during the cup formation and a general ramp up as the stock price rises. Cup and handle patterns are easily identified on a chart because of their unique appearance.

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