Cup And Handle Stock Chart Pattern

January 6, 2021|by  admin|no comments

The drop of the handle part should retrace about 30% to 50% of the rise at the end of the cup. For stock prices, the pattern may span from a few weeks to a few years; but commonly the cup lasts from 1 to 6 months, while the handle should only last for 1 to 4 weeks. The handle can be either a small, unorganized pullback, or a bear flag or pennant.

There’s no good way to distinguish falling asset prices from the first stage of a stock which will make an eventual rally. Lucky investors who get in at the bottom of the cup will, to be sure, make more than those who invest during the handle, but just as often they may predict recoveries that never come. The cup part of the pattern should be fairly shallow, with a rounded or flat “bottom” (not a V-shaped one), and ideally reach to the same price at the upper end of both sides.

A rounding bottom is a chart pattern used in technical analysis that is identified by a series of price movements that graphically form the shape of a “U.” The subsequent decline ended within two points of theinitial public offering price, far exceeding O’Neil’s requirement for a shallow cup high in the prior trend. The subsequent recovery Western Union stock price wave reached the prior high in 2011, nearly 10 years after the first print. The handle follows the classic pullback expectation, finding support at the 50% retracement in a rounded shape, and returns to the high for a second time 14 months later. The stock broke out in October 2013 and added 90 points in the following five months.

Some traders like these types of cups, while others avoid them. Those that like them see the V-bottom as a sharp reversal of the downtrend, which shows buyers stepped in aggressively on the right side of the pattern. Opponents of the V-bottom argue that the price didn’t stabilize before bottoming, and therefore, the price may drop back to test that level. Ultimately, if the price breaks above the handle, it signals an upside move. 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. The purpose of our site is to help focus investors on those stocks that have good fundamentals which are forming favorable chart patterns such as the “Cup and Handle”. One of the biggest factors an investor should consider before buying a stock is what type of chart pattern the stock is forming.

Cup Shape

The indicated volume spike on 3/11 drove the stock through the $12.25 pivot point. Logarithms of alpha and beta must be taken historical exchange rates because these ratios involve volumes and are generally so much larger than delta as to swamp its effects completely.

Spot the cup and handle pattern and drink to your trading profits. The left side of the cup is marked by a downward sloping arch. This part of the pattern represents the stock’s temporary pullback. The pullback cup and handle stock occurs because as the stock tests old highs, selling pressure increases. As the stock falls, trading volume tends to decrease. The chart above of the Utility SPDR ETF illustrates an inverse cup and handle.

5,289.9975.411.862.537,130,598Please sign up for viewing the full list of stocks. Some pattern names are registered trademarks of their respective owners. For more information on this pattern, readEncyclopedia of Chart Patterns Second Edition, pictured on the right, pages 149 to 163. That chapter gives a complete review of the chart pattern, compared to what is described below. If you’re not ready to start straight away, you can practise your trades on a risk-free demo account. You could also place an order above or below the handle to buy or sell when the asset reaches a more favourable price.

Place a stop-loss below the lowest point of the handle. If the price oscillated up and down a number of times within the handle, a stop-loss might also be placed below the most recent swing low. The handle should not drop into the lower half of the cup, and ideally, it should stay in the upper third.

How To Trade Head And Shoulders Tops And Bottoms

A shallower handle shows more strength than a deep one. Most cup and handle patterns indicate that the buy point is the highest point of the handle or just above the handle.

cup and handle stock

The cup pattern typically lasts for several weeks to six months or longer, but the duration of the handle is the most important feature. The handle should complete within a month, or else it may signal that there is not enough momentum to break through the higher resistance level. The cup and handle pattern is sometimes unreliable when using it to trade illiquid stocks. The time frame of cup and handle patterns can range from one day to several years, making this indicator occasionally ambiguous. Traders use this visual pattern to spot trends in the market and make trades based on the pattern.

How To Enter And Exit This Powerful Pattern

The cup and handle pattern occurs during an uptrend. A buy signal is triggered when prices surpass the high of the right side of the cup. So I don’t go on the hunt for the cup and handle pattern. But — and this is super important — a lot of traders do. And that means it can be cup and handle stock a self-fulfilling prophecy. REEMF started one in April of 2019 and went all the way to the end of May before spiking up. The second example is another classic cup and handle pattern that develops over three to four months, with the handle forming over approximately two weeks.

The price rejects forming a double top as a bull flag reversion forms the handle. When the bull flag triggers spiking the price through the lip, the cup and handle pattern is triggered the trend resumes the next leg higher with new highs. Usually cup and handles are considered bullish patterns.

Point C is the highest point in the right-hand-side of the cup, the pivotpoint, completing the cup formation. Then, as the price pulls back on lighter volume, a handle is formed with the most recent day being point D. The cup-with-handle pattern is now complete and the buy point will occur when the price breaks above the value at point C, on large volume.

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. Stay on top of upcoming market-moving events with our customisable economic calendar. Discover how to trade – or develop your knowledge – with free online courses, webinars and seminars. With forex trading, you don’t own the underlying asset, which means you can go long or short . Remember that you should always use your knowledge and risk appetite to decide if you are going to trade based on ‘buy’ or ‘sell’ signals. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors.

Make sure it doesn’t exceed the cup portion in time or size of decline. A good cup with handle should truly look like the silhouette of a nicely formed tea cup. The handle always shows a smaller decline from high to low; it represents a final shakeout of uncommitted holders, sending those shares into sturdier hands in the market. The technical target for a cup with handle pattern is derived by adding the height of the “cup” portion of the pattern to the eventual breakout from the “handle” portion of the pattern. The stocks below have a Cup w/ Handle chart pattern as of the date above.

The pattern forms during as a result of consolidation a bullish movement and indicates a continuation of that bullish trend after its completion. This large U-shaped pattern may look like a typical double top but for the purposes of this pattern, it is called the cup. Noting key resistance at top#1 and top#2, speculators begin to initiate Adidas stock price short positions. From a technical perspective, this is a very important part of the pattern. At this point more positive fundamental news is released and the stock price rallies. With selling pressures satiated and the flow of fundamental news decidedly bullish volume increases dramatically and the stock works toward a fresh new high.

After a downtrend, prices reverse in a gentle dome formation creating the cup. Prices change direction by retracing upward and then falling back to the support price level established by the low of the right lip of the cup. Once prices penetrate the low of the right lip of the cup, then a sell signal is triggered and in the chart above prices fall thereafter. Cup and handle patterns were first identified by William J O’Neil in his book How To Make Money In Stocks. The cup and handle is a longer term continuation pattern, normally observed on weekly charts.

Trading Signals

On 2/26 the stock broke soundly through the $11.25 pivot point on nearly three times the 50 day average volume easily meeting the buy criterion. Figure 9 and Figure 10 show the cup-and-handle pattern for LCOS. In Figure 10, the stock tries to breakout on 2/17 at $43.75, but reverses and closes down that day at $41.63. After a couple more aborted attempts, the price finally clears and holds above $43.75 on 3/9, with sufficient volume to meet the buy criterion. Using a tight sell-stop, the stock would have been sold on 3/17 at $40.50.