A price pattern on a security's price chart is a technical indicator that resembles a cup with a handle, where the cup is in the shape of a "u" and the handle has a slight downward drift. The is considered a signal, with the right-hand side of the pattern typically experiencing lower trading .
What Does A Tell You?
As a stock forming this pattern tests old highs, it is likely to incur selling pressure from investors who previously bought at those levels; selling pressure is likely to make price consolidate with a tendency toward a downtrend trend for a period of four days to four weeks, before advancing higher. A is considered a continuation pattern and is used to identify buying opportunities.
It is worth considering the following when detecting patterns:
Length: Generally, cups with longer and more "U" shaped bottoms provide a stronger signal. Avoid cups with a sharp "V" bottoms.
Depth: Ideally, the cup should not be overly deep. Avoid handles that are overly deep also, as handles should form in the top half of the cup pattern.
Volume: should decrease as prices decline and remain lower than average in the base of the bowl; it should then increase when the stock begins to make its move higher, back up to test the previous high.