Cup-And-Handle Pattern Definition

If interested in trading this pattern, focus on stocks that are extremely weak, as opposed to looking for the pattern in strong stocks. I don’t personally look for inverted cup and handles in stocks or trade them. The cup and handle pattern is a trading pattern that can be analysed in all financial markets. The cup and handle formation is created when the price of an asset falls but then makes its way back up to the point where the fall started. Cup and handle patterns are found on all timeframes, from intraday charts up to weekly and monthly charts.

• When intraday trading, cup and handles tend to perform better during active times of a specific currency pair.
• That chapter gives a complete review of the chart pattern, compared to what is described below.
• This is an inverted form of the cup and handle pattern that forms in a downtrend.
• If a cup and handle forms and it is confirmed, the price should see a sharp increase in the short- to medium-term.

That’s because the price tends to continue its upward move at the beginning, and then reverses direction when bullish momentum declines. The downward breakout is confirmed when prices close below the support line that marks the bottom of the cup. The increased selling pressure Cup and Handle Pattern pushes the price lower to retest the support level. The pattern is considered valid when a downward breakout occurs and the price closes below the support or neckline. $AXON looking orderly on this pullback as it is putting in the handle of its cup with handle base.

What is a cup and handle reversal?

The https://www.bigshotrading.info/ is a formation on the price chart of an asset that resembles a cup with a handle. As its name implies, the pattern consists of two parts — the cup and the handle. Further down in the article we have several charts to show how it looks like in a chart.

Stay on top of upcoming market-moving events with our customisable economic calendar. Also, you can see that the lower part of the up happened when the price reached a 50% Fibonacci Retracement level. 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. The “Vs” criteria I don’t change very often, because they are relative to what the indexes or other stocks are doing.

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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. The subsequent decline ended within two points of theinitial public offering price, far exceeding O’Neil’s requirement for a shallow cup high in the prior trend. The subsequent recovery wave reached the prior high in 2011, nearly 10 years after the first print. However, the price fails to continue moving higher and instead it reverses and declines much lower. The information in this site does not contain investment advice or an investment recommendation, or an offer of or solicitation for transaction in any financial instrument.

Bulls then start coming in and take the price to the previous high.Bears come in again and push the price lower. The traditional buy point is a breakout above the high of the handle, which clearly puts bullish momentum on your side. When the cup and handle follows through, it typically generates gains of +20% to 30% over several weeks . Light volume – Volume should dry up at some point near the bottom of the base of the cup. This indicates the sellers are gone and enables the bulls to resume control.

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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. The cup and handle pattern is a pattern that traders use to identify whether the price of an asset will continue moving upwards.