Cup and Handle
Cup and Handle: A cup and handle chart is a bullish continuation pattern in which the upward trend has paused but will continue in an upward direction once the pattern is confirmed.
There are two parts to this chart pattern:
The cup
The handle
The cup forms after a downtrend is followed by an uptrend and looks like a bowl or rounding bottom.
The handle follows the cup formation and is formed by a generally downward/sideways movement in the Share price.
A breakout from the handle’s trading range signals a continuation of the previous uptrend.
How to Trade the Cup and Handle Chart Pattern
The cup should resemble a bowl or rounding bottom.
The perfect pattern would have equal highs on both sides of the cup, but in the real world, perfect doesn’t exist.
After the high forms on the right side of the cup, there is a pullback that forms the handle.
The handle accumulates before the breakout.
The handle Should to be smaller than the cup. The handle should not break the lower half of the cup price, and ideally, it should stay in the upper third.
The buy point occurs when the asset breaks out or moves upward through the old point of resistance (right side of the cup).
This high breakout should occur with increased volume.
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.
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.
