The cup and handle pattern is a form of technical analysis indicator that arises when the price chart of an asset resembles a U-shape with a horizontal line that normally drifts downward, similar to a teacup. It is a bullish continuation pattern, which implies that once the pattern is completed, the price will normally rise.
For successful trades with the cup and handle chart pattern, one must correctly identify the pattern, purchase the asset at the logical entry point, establish a stop-loss for risk management, and determine a price goal for exiting a profitable trade.
Cup and Handle Pattern is a bullish continuation pattern that signals a strengthening of a security's price followed by a breakout, after which the scrip's price soars up. The U-shaped cup represents the era of consolidation, while the handle represents the moment of breakout.
An American technical analyst is credited with popularising cup and handling chart patterns.
In the late 1980s, William J. O'Neil published How to Make Money in Stocks. In a few places, O'Neil presented an in-depth investigation and identification of the cup and handle. He said that cup and handle chart patterns can last anywhere from 7 to 65 weeks (most are three to six months). The typical percentage correction from the absolute peak to the price pattern's low point ranges from 12% to 15% to 33%.
As the stocks in this pattern test old highs, they are likely to face pressure from investors who have previously purchased at this level. It will most likely consolidate into a decline for 4 to 4 weeks before rising due to selling pressure. It is a sort of bullish continuation pattern that is used to spot purchasing opportunities.
As a trader amny traders want to learn how trading with the Cup and Handle Chart Pattern is done. One must identify and comprehend the following critical points: