Cup and Handle Definition Forexpedia by BabyPips com

Glen Acres of Seattle Washington asked about a pattern called a “cup and handle”, and if recent price action in gold futures has resulted in the formation of this pattern. The https://www.bigshotrading.info/ has been around for over 30 years and is widely followed by many technical traders. Though limitations of the pattern are not to be ignored, the strong trends in crypto help make the cup and handle pattern effective in trading crypto markets. There are a couple of variations to this pattern that crypto traders need to be aware of. First, there are times when the handle portion of the pattern develops above the old high.

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. In any case, the handle should retrace less than 1/3 to 1/2 the depth of the cup – the shallower the retracement, the more bullish the movement following a breakout should be. The handle can develop over one week to several months on a daily chart, although ideally completes in less than one month. Once the cup is completed, the handle will begin to develop. These trend lines should have a slight downward slant to them.

Momentum Trading

The chart pattern is categorized as a bullish reversal pattern. A breakout is when the price moves above a resistance level or moves below a support level. The price movement of a breakout can be described as a sudden, directional move in price that is… Bitcoin is just balancing on the edge of a huge rising wedge. What’s more, there’s an inverted cup and handle formation in the middle of it, whose target is the $6.6k level. Rising wedges have it that almost always their lower edge is subject to a retest, followed by a proper decline. The handle alone needs at least five days to form, but it could go on for weeks.

In my opinion, the cup and handle pattern can be both a continuation pattern and a reversal pattern. Finally, when the price breaks out of Resistance, the cup and handle pattern is “confirmed”, and the market could move higher. A breakout is when the stock price pushes above the resistance level created by the highs of the handle. There are many different types of trading patterns that traders can study to help them make better investment decisions so they benefit from trends in the market.

What is a ‘cup and handle’?

The stock then rebounds, testing the previous high resistance levels, after which it falls into a sideways trend. In the final leg of the pattern, the stock exceeds these resistance levels, soaring 50% above the previous high. A cup and handle is considered a bullish signal Cup and Handle Pattern extending an uptrend, and it is used to spot opportunities to go long. This gradual and slow range is what will set the stage for the bullish trend to resume. People will think this is a double top which will trap some weak sellers when we finally break upwards.

• The price rallies back to the point where the fall started, which creates a “U” or cup shape.
• The cup component forms as a result of the buying power drying out.
• If the breakout is successful, then you can consider moving your stop loss to the breakeven level, locking in the trade without experiencing a loss.
• While cup and handle patterns are generally considered one of the more reliable trading signals, it’s important to note that no chart pattern works all the time.
• Specifically, with the cup and handle, certain limitations have been identified by practitioners.
• Once the cup and handle pattern has fully formed, you can look for a breakout above the cup.

Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. The chart pattern, cup with handle, is a continuation pattern formed by two rounded troughs, the first being deeper and wider than the second. Cup and handle patterns are easily identified on a chart because of their unique appearance. A cup with handle pattern is a continuation pattern that gets its name from the visual pattern it makes on the chart. The cup is a curved u-shape or rounded bottom, while the handle slopes slightly downwards. While cup and handle patterns are generally considered one of the more reliable trading signals, it’s important to note that no chart pattern works all the time.