Cup and Handle Pattern
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The cup and handle is identified as a pattern of price consolidation, with a "cup" portion at the high end of the consolidation and a "handle" portion at the low end. The handle is typically shorter in duration than the cup. Both the cup and handle portions can vary in shape and size, but the important thing is that they do not overlap. -
The most important characteristic of the cup and handle pattern is its location within a strong uptrend. The pattern identifies buying opportunities when traders believe that the bulls are exhausted and that prices are ready to resume their advance.
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Cup and handle patterns are usually found in strong uptrends, with the handle portion forming after a significant period of price consolidation. -
Traders should be careful not to draw the handle too tightly, or there is a risk that the pattern will fail to be confirmed by a resumption of the upward trend. One way to overcome this is to wait for the price to close above the midpoint between the beginning of the cup and the end of the handle before buying.