Cup and Handle Pattern

"Cup and Handle" is a continuation pattern that usually forms in bullish markets. Most "Cup and Handle" patterns are very reliable and offer great trading opportunities. "Cup" formation is developed during price rallies from the round bottom. The "Handle" part forms due to a price correction before a clear breakout to the upside.

Trading "Cup and Handle" pattern is a two fold process. First a "Handle" can be traded as a corrective pattern and secondly as a continuation pattern (of the prior trend) after a breakout from the top of the "Cup." The handle part (right side) usually corrects about 25% to 38% (of depth of the Cup) from the high pivot point to the bottom of the Cup. After the correction (handle), the pattern will pick its prior trend and trade in a breakout fashion above the 'top' of the 'Cup'.

Trade: The best trading opportunity is generated when the price clears the top of the "Cup." A "long" trade is entered when the price closes above the high of the cup.

Target: Most "Cup & Handle" patterns result from 62% to 100% the depth of the "Cup" from the breakout levels.

Stop: Place a "stop" order below the low of the handle to protect the trade.


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