Handle And Cup Pattern

identify the cup

A chart pattern is a graphical presentation of price movement by using a series of trend lines or curves. Chart patterns can be described as a natural phenomenon of fluctuations in the price of a… The Keltner Channel or KC is a technical indicator that consists of volatility-based bands set above and below a moving average. The cup and handle pattern resembles a U shape with a horizontal line, generally drifting downward, like a teacup. A double bottom pattern is a technical analysis charting pattern that characterizes a major change in a market trend, from down to up.


In the securities market, recognising the cup and handle chart can be a fruitful exercise to make gains. Please see Open to the Public Investing’s Fee Schedule to learn more. Volume should contract as the handle forms and then expand on the breakout. There is no upper limit with some patterns taking as long as a year.

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Track Alibaba, JD.com, NetEase and other top Chinese https://forex-world.net/s trading… The handle should also show a downward slope along at least a portion of its price lows, not an upward one. Greed, fear, hope, despair and other emotions drive stock prices.

Index Volume

This means that the handle of a cup and handle is considered a strong indication that the stock is poised for growth. It’s also important to keep in mind that the cup and handle pattern is not a perfect indicator. There will be times when the stock price does not move higher after the pattern forms.

The price movement of a breakout can be described as a sudden, directional move in price that is… A V-bottom, where the price drops and then sharply rallies, may also form a cup. Some traders like these types of cups, while others avoid them. Those that like them see the V-bottom as a sharp reversal of the downtrend, which shows buyers stepped in aggressively on the right side of the pattern.

Try applying contradictory methodologies or trading indicators to see if you cannot unearth an edge. Remember in this line of work, you just need to be a little bit better than the next trader to make a living. 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.


So make sure you don’t forget to place a stop-loss order above the top of the handle. This stop loss should be set based on your risk tolerance. In my experience, narrow or tall patterns tend to perform better than wide or short ones. You can find this pattern on both uptrends and downtrends when the price climbs up steadily to reach a new high, and then falls back down to test the low of the initial move.

How to use Moving Average and ride big trends

This is a powerful chart pattern that’s used by stock traders to capture explosive breakout moves — where the stock price could increase 1000+% within a few years. There are several benefits of using the cup and handle pattern. First, it is a relatively easy pattern to identify in a chart. Second, you don’t need to use any technical indicators like the RSI and moving averages.

This will help you confirm a downward breakout on the inverted cup handle pattern. As you might expect from the name, the cup and handle chart is a technical indicator that looks like a cup with a handle. The cup is a U shape, with the bottom of the cup having a rounded bottom and a handle that forms to the right in a slightly downward direction. Cup and handle patterns were first identified by William J O’Neil in his book How To Make Money In Stocks. The cup and handle is a longer term continuation pattern, normally observed on weekly charts.

This pattern typically forms when the market swings up and bounces off the key support level. A stop-loss controls the trade risk by establishing a level at which the trader should exit the trade . In the cup and handle chart pattern, a stop-loss is placed at the lowest point of the handle or the lowest point of the most recent swing.

trading strategy

It’s important to remember to look at the chart pattern over a longer-term time frame, such as daily, weekly, and monthly charts, in order to identify the pattern correctly. Additionally, when you identify the pattern, you should wait for the handle to form completely before entering a trade. After a cup and handle pattern forms, the price should see a sharp increase in the short- to medium-term.

What happens after a Cup and Handle pattern forms?

The standard cup and handle pattern is a bullish signal, but there is also a bearish version of this pattern called “Inverse Cup and Handle” pattern. Thanks man , one of the best articles on trading the cupnhandle pattern. If you guys wanna see some cups getting completed right now, go open the bitcoin ethereum and xrp charts. Finally, you can use a buy-stop trade to take advantage of a bullish trend. This is a situation where you place a buy-stop order above the resistance. In this case, a bullish trade will be opened after the price rises above the resistance level.

  • In order to prevent a false signal, it’s important to receive cup and handle pattern confirmation before buying.
  • One of the comments from yesterday’s « After Hours » article was a question about the identification and validity of a pattern.
  • And those are registered ones, with twice as much hidden from view.

As a result of this behavior, investors generally see the handle as the place in which to buy. A stock’s price will dip while it is in the handle, but in a true cup-and-handle pattern this dip will not endure. It typically represents technical analysis rather than a shift in the stock’s fundamental value. As a result, once this post-recovery trading has finished an investor can expect the stock to resume its previous growth. The main reason for this is that bear markets are characterized by high levels of fear and uncertainty and investors tend to sell on any break-outs or rallies.

If you’re trading the inverted cup and handle chart pattern, your best bet is on the downside. The handle is formed inside the trading range when prices fail to reach the previous high, and pull back down to re-test the support line once again. The creation of the cup and handle formation occurs when a stock price falls but then moves back up to the point where the decline began.

Cup with Handle

As the https://bigbostrade.com/ gains steam sentiment improves dramatically and new buyers begin to talk about certain new highs but those that purchased the stock at or near top#1 get ready to sell. Just short of the old highs at top#1 aggressive selling begins on no specific news but in reality some investors that bought near top#1 have already begun to sell. The stock begins to work significantly lower on increased volume creating a second, well defined top (top#2). The cup and handle pattern as a lower failure rate when compared to other chart patterns, meaning it is a good indication of what’s to come. Patterns were shorter handles have a higher success rate than patterns with longer handles. Patterns with a more bottomless cup accompanied by a slightly more upper left lip versus right lip also have a higher success rate.

https://forexarticles.net/ action is an important and common trading strategy that traders use to identify entry and exit positions. There are several approaches to the price action strategy. A cup-and-handle pattern can take place over any period of time. Some patterns emerge during day trading, forming over the course of hours, while others can take shape over the better part of a year. Often the asset’s price will remain at its low point for weeks or even months before recovering its value.

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