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Anatomy of Cup & Handle Pattern Explained with examples ☕
Updated
What is Cup & Handle Pattern ?
1.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.
2.A cup and handle is considered a bullish signal extending an uptrend, and is used to spot opportunities to go long.
3.Technical traders using this indicator should place a stop buy order slightly above the upper trendline of the handle part of the pattern.
Some Examples from -MY OWN ANALYSIS :-
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1 Cup with Handle Base
2 Saucer Base
The Saucer base is basically a long, drawn out cup base. Characteristics of a Saucer are:
1. A depth of 12-20%.
2. A length of 7 weeks to more than a year.
3. If a handle forms then the buy point is the peak just before the pull back plus 10 points.
4. However a handle will often not form after the long period of this base. If there is no handle then the buy point is the peak on the left side of the saucer plus 10 points.
3 Tight Closes and Narrow Price Spreads
Double Bottom
Flat Base – (Second Stage)
Second stage base that follows an uptrend off of a stage 1 proper base (cup with saucer, saucer, double bottom ) and an uptrend
Tight Closes and Narrow Price Spreads
Prior Sequence
1. Uptrend
2. Proper Base
4 Ascending Base – (Second Stage)
Second stage base that follows an uptrend off of a stage 1 proper base (cup with saucer, saucer, double bottom ) and an uptrend
Pull-backs occur at general market declines
Square Box – (Second Stage)
Second stage base that follows an uptrend off of a stage 1 proper base (cup with saucer, saucer, double bottom ) and an uptrend
Buy Point = $ 0.10 above highest peak
< 10-15%
4 – 7 Weeks
5 3 – 4 Weeks Tight – (Second Stage)
Second stage base that follows an uptrend off of a stage 1 proper base (cup with saucer, saucer, double bottom ) and an uptrend.
Volume over 3 – 4 weeks is well under control
Weekly closes within 1%, however, 1 week can be 1.5%
Opportunity to add
High Tight Flag
The pattern forms when a stock surges 100% to 120% in four to eight weeks. The stock then corrects 10% to 25% in three to five weeks. The ideal buy point is the high of the flag plus 10 Points
Breakout from Proper Base followed by price run-up of > 100% within 4-8 weeks
3 – 5 weeks correction between 10 – 25%
Buy Point = 0.10 higher than peak of correction
6 Base on Base
If an uptrend is less than 20% and the stock builds another base, it's called a "base-on-base" pattern and is counted as part of the previous base
Conclusion
The cup and handle pattern is a bullish continuation pattern triggered by consolidation after a strong upward trend. The pattern takes some time to develop, but is relatively straightforward to recognize and trade on once it forms. As with all chart patterns, trading volume and additional indicators should be used to confirm a breakout and continuation of the original bullish price movement.
1.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.
2.A cup and handle is considered a bullish signal extending an uptrend, and is used to spot opportunities to go long.
3.Technical traders using this indicator should place a stop buy order slightly above the upper trendline of the handle part of the pattern.
Some Examples from -MY OWN ANALYSIS :-
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1 Cup with Handle Base
2 Saucer Base
The Saucer base is basically a long, drawn out cup base. Characteristics of a Saucer are:
1. A depth of 12-20%.
2. A length of 7 weeks to more than a year.
3. If a handle forms then the buy point is the peak just before the pull back plus 10 points.
4. However a handle will often not form after the long period of this base. If there is no handle then the buy point is the peak on the left side of the saucer plus 10 points.
3 Tight Closes and Narrow Price Spreads
Double Bottom
Flat Base – (Second Stage)
Second stage base that follows an uptrend off of a stage 1 proper base (cup with saucer, saucer, double bottom ) and an uptrend
Tight Closes and Narrow Price Spreads
Prior Sequence
1. Uptrend
2. Proper Base
4 Ascending Base – (Second Stage)
Second stage base that follows an uptrend off of a stage 1 proper base (cup with saucer, saucer, double bottom ) and an uptrend
Pull-backs occur at general market declines
Square Box – (Second Stage)
Second stage base that follows an uptrend off of a stage 1 proper base (cup with saucer, saucer, double bottom ) and an uptrend
Buy Point = $ 0.10 above highest peak
< 10-15%
4 – 7 Weeks
5 3 – 4 Weeks Tight – (Second Stage)
Second stage base that follows an uptrend off of a stage 1 proper base (cup with saucer, saucer, double bottom ) and an uptrend.
Volume over 3 – 4 weeks is well under control
Weekly closes within 1%, however, 1 week can be 1.5%
Opportunity to add
High Tight Flag
The pattern forms when a stock surges 100% to 120% in four to eight weeks. The stock then corrects 10% to 25% in three to five weeks. The ideal buy point is the high of the flag plus 10 Points
Breakout from Proper Base followed by price run-up of > 100% within 4-8 weeks
3 – 5 weeks correction between 10 – 25%
Buy Point = 0.10 higher than peak of correction
6 Base on Base
If an uptrend is less than 20% and the stock builds another base, it's called a "base-on-base" pattern and is counted as part of the previous base
Conclusion
The cup and handle pattern is a bullish continuation pattern triggered by consolidation after a strong upward trend. The pattern takes some time to develop, but is relatively straightforward to recognize and trade on once it forms. As with all chart patterns, trading volume and additional indicators should be used to confirm a breakout and continuation of the original bullish price movement.
Trade closed: target reached
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