Volume ideally drops off during the consolidation, or has at least one or more really low volume days . This is perhaps a reflection of the weaker prior advance in price. Upon closer inspection, we found 5 signs that should’ve called the validity of this pattern into question. Together, these signs all pointed to a loss of momentum in what was a weak prior advance. You will automatically start receiving daily market analysis, trade ideas, and blog updates.


Knowing how to read and interpret https://en.forexbrokerslist.site/s is one of the most important aspects of trading. We explore the cup and handle pattern, as well as the inverted cup and handle, and show you how to trade when you recognise these patterns. Pure long-term technical traders tend to follow the seven weeks or more rule. So I don’t go on the hunt for the cup and handle pattern.

Leveraged https://forex-trend.net/ in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading.

  • The price action begins by making a gradual bearish move.
  • We have applied two targets marked as Target 1 and Target 2.
  • One point of clarification, you should not worry yourself trying to come up with exact measurements for your cup and handle pattern.
  • The best way to set the target is to measure the distance from the bottom of the cup to the top of the cup.

The break through the trend line is shown in the red circle on the chart, which would signal an opportune time to close out the trade in its entirety. The Cup With Handle pattern, developed by William O’Neil, is a technical indicator for identifying the continuation of a trend after a period of consolidation. The profit target is usually 20–25% above the initial resistance , and the stop-loss range is 5–8% below that line. The cup forms after an advance and looks like a bowl or rounding bottom. As the cup is completed, a trading range develops on the right-hand side and the handle is formed. A subsequent breakout from the handle’s trading range signals a continuation of the prior advance.

This could attract traders to open a position at the price rise, or at least avoid opening a short position against it. This article will explore how to identify and trade the cup and handle pattern in various financial markets​. Named for its distinctive shape, the cup and handle pattern is a powerful, bullish signal that can indicate a stock or crypto is likely to see a price increase in the future. This top chart pattern is a favorite among swing traders, who have been relying on this pattern for decades to spot potential opportunities for profit. The inverted cup and handle pattern consists of an inverted cup and a handle.

There have been many of these types of https://topforexnews.org/s in the last couple weeks. Now, let’s revisit the same chart using the logic of selling the supply or upper resistance line on the chart. The breakout should produce significant volume and price expansion. The first target is equivalent to the size of the handle, while the second target is equivalent to the size of the cup. This is the point where the price reverses and begins to move in a bearish direction. So, you can watch the price action clues so as to extend your gains from the trade.

Drawing the Cup and Handle

Here’s an example of a cup and handle in a longer time frame. NGTF started the pattern at the end of November 2018 and went into February of 2019. A proper handle forms in the upper half of the base and is at least five trading days long, typically light in volume. It can take some time for this pattern to develop … but traders like it because it’s easy to recognize and has an excellent risk to reward ratio. A double bottom pattern is a technical analysis charting pattern that characterizes a major change in a market trend, from down to up.

This is because if the stock has low volume during breakout then the uptrend is less likely to sustain. The stock has been in an uptrend from August 2020 to June 2021. We have seen a huge bullish rally from Rs. 165 to Rs. 1,726.45. Because of selling pressure, the stock forms a handle and hits a low of Rs. 50. If you’re not ready to start straight away, you can practise your trades on a risk-free demo account.

How To Trade A Cup and Handle Pattern

Let’s take a look at a potential Cup and Handle trading system and the rules we need to follow when trading this pattern. The Cup with Handle formation has a very specific signal. When we get this indication, we can buy or sell the Forex pair depending on the potential of the pattern. The bearish Cup & Handle starts with a bullish price move, which gradually slows down and turns into a bearish move.

Or downwards, rather than up, but must remain over what he called their 10-week moving average. William O’Neil ran his analysis across weekly averages, with the 10-week moving average equivalent to today’s 50-day moving average. To qualify as a cup and handle pattern, the retracement of the cup should be 1/3 or less of the previous advance.


In some cases, the start of the price decrease and the end of the price increase may diverge in terms of the level that they are supposed to be located at. The pattern begins with a price decrease, during which the currency pair slowly changes its direction. It all depends with the price move before the formation of the pattern. Hi Traders, Investors and Speculators of the Charts 📈📉 CVXUSDT is another altcoin with massive upside potential. Infact, after consolidating for such an extended period, a parabolic move to the upside is very possible.

The position at which the price breaks through the handle has been shown. The handle breakout is a way of confirming the pattern. In most cases, the handle is locked within a small bearish channel on the chart. The rounded structure created by this price movement forms the Cup portion of the pattern. This pattern can act as a reversal or continuation signal. This pattern occurs regularly within financial markets.

Cup and Handle Pattern Trading Strategy Guide

The handle should have a retracement of 1/3 or less of the cup’s advance and should complete within 1-4 weeks. Early entries can benefit from tighter stops, such as several percent below the downtrend line or 20-day moving average . Mid-point maximum – The mid-point of the handle should be above the mid-point of the base.


Stop-loss orders may be placed either below the handle or below the cup depending on the trader’s risk tolerance and market volatility. The image above is a monthly chart of the popular hotel and casino company Wynn Resorts Ltd. The chart exhibits a cup and handle formation with a clear prior uptrend as marked by the trendline showing higher highs and higher lows. A moving average may also be used instead to confirm the uptrend. Even winning 40% of cup and handle trades can be quite profitable as long as the trader is making 3x as much on their winners as they lose on their losers. Cup and handles work better in strong stocks with price momentum, and when overall market conditions are healthy.

Cup and handle chart pattern explained

The shallower and more rounded the cup, the better the pattern. Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media. For cup and handle reversal, look for a strong accumulation base to build the move. That small pause gives us a good low risk opportunity to get into the trade to ride the next wave of uptrend.

Simple Cup and Handle Trading Strategies

Looking at the strong bullish momentum, they will run to cover their positions in losses. Whereas, as there has been a breakout, more and more traders will turn optimistic about the stock and buy it which contributes to the up move. 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.

Because the cup and handle pattern is difficult to define with strict buy and sell rules, we refer to other research. I will like to share some of the charts for cup and handle. But I don’t think we can attach our charts in the postings. For cup and handle continuation, look to trade with the trend, especially if the trend is strong.