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cup and handle pattern

Mastering a Cup and Handle Pattern – price action

This pattern was popularized by William o Neil in his book How to make money in stocks. The Cup and handle pattern has always been traders’ favorite and it is because it is one of the most successful chart patterns. The Cup and handle pattern has a very low failure rate. This pattern sports a low failure rate but a below-average rise when compared to other chart pattern types

The one thing that every trader and investor needs to keep in mind while trading the pattern is that it is a short-term bullish/bearish continuation or reversal pattern and hence you should set a smaller target while trading the pattern. 

Cup and handle - bullish

identification guidlines

  1. The stock should be at least 30% up before the pattern is formed. 
  2. The cup should be U-shaped. 
  3. Handle duration should be a minimum of 5 trading days if you are a swing trader.
  4. The handle of the cup should be in the upper half of the cup.
  5. The Cup Lips should be at the same level.
A cup and a handle pattern

breakout identification

  1. Slight increase in volume in a bullish market. Good increase in volume in a bearish market. 
  2. If a cup forms inside a cup then trade at the breakout of the inner cup’s lip.
  3. Tall and narrow patterns perform the best. 
  4. Shorter handles perform better than longer ones.
  5. Cup’s with higher left cup lips perform better than others.

While trading the pattern, Set stop-loss 0.15%  below the handle.

cup and a handle pattern

A inverted cup and a handle- Bearish pattern

cup with a handle

Learn more about trading Chart patterns

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