Cup and Handle

Loading the player...

What is a 'Cup and Handle'

A pattern on bar charts resembling a cup with a handle. The cup is in the shape of a "U" and the handle has a slight downward drift. The right-hand side of the pattern has low trading volume. It can be as short as seven weeks and as long as 65 weeks.

As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for four days to four weeks... then it takes off. Below is an example of a cup and handle chart pattern:

 

Cup and Handle

BREAKING DOWN 'Cup and Handle'

A couple points on trying to detect cup and handles: Length - Generally, cups with longer and more "U" shaped bottoms, the stronger the signal. Avoid cups with a sharp "V" bottoms. Depth - Ideally, the cup should not be too deep. Also, avoid handles which are too deep since the handles should form in the top half of the cup pattern. Volume - Volume should dry up on the decline and remain lower than average in the base of the bowl. It should then increase when the stock finally starts to make its move back up to test the old high. Retest (of old high) - doesn't have touch or come within a few ticks of old high. However, the further the top of the handle is away from the highs, the more significant the breakout needs to be.

RELATED TERMS
  1. Rounding Bottom

    A chart pattern used in technical analysis, which is identified ...
  2. Outside Reversal

    A price chart pattern in which a security's high and low prices ...
  3. Double Top And Bottom

    Chart patterns in which the quote for the underlying investment ...
  4. Mat Hold Pattern

    A pattern found in the technical analysis of stocks that ultimately ...
  5. Regulation U

    The Federal Reserve Board regulation that governs loans by banks ...
  6. Equivolume

    A chart that compares price and volume and plots them together ...
Related Articles
  1. Trading

    Watch These Cup and Handle Buying Opportunities (FOXA, SLB)

    These cup and handles are forming now. A breakout above the handle signals a fresh advance.
  2. Markets

    Monitor These Cup and Handle Chart Patterns (CPGX, CB)

    Various versions of the cup and handle playing out right, including reversal and continuation stock patterns.
  3. Trading

    New Approaches To The Old Cup And Handle

    Many cup and handle traders adhere strictly to O'Neil’s rules for construction, but there are many variations that produce reliable results.
  4. Trading

    Analyzing Chart Patterns: Cup And Handle

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com A cup-and-handle pattern resembles the shape of a tea cup on a chart. This is a bullish continuation pattern where the upward ...
  5. Trading

    4 Cup and Handle Patterns To Watch

    These stocks have set up in this classic pattern, suggesting that they could break higher.
  6. Personal Finance

    Do Big Soccer Tournaments Boost Market Performance?

    See why the conventional wisdom about the World Cup — that it boosts economic activity and helps local stock markets — is probably wrong.
  7. Markets

    Most Affordable Cups of Coffee

    With coffee playing an important role in social norms, this article looks at the most and least affordable cups of coffee available.
  8. Investing

    Why FIFA Can't Give the 2022 World Cup to Qatar

    Learn about the high price tag for the 2022 World Cup in Qatar, along with allegations of human rights abuses and bribery scandals in the bidding process.
  9. Trading

    Technical Analysis: Chart Patterns

    By Cory Janssen, Chad Langager and Casey MurphyA chart pattern is a distinct formation on a stock chart that creates a trading signal, or a sign of future price movements. Chartists use these ...
  10. ETFs & Mutual Funds

    Day's First Trade Can Serve As Support/Resistance

    The first trade of the day in liquid markets defines a narrow price level that can act as support or resistance for the entire session.
RELATED FAQS
  1. What are the differences between a bar chart and candle sticks?

    Explore the difference between bar and candlestick charts. Learn how technical analysts use charts in the analysis of supply ... Read Answer >>
  2. How do I implement a forex strategy when spotting a Rounding Bottom Pattern?

    Understand the key factors to implementing a profitable forex trading strategy based on recognizing the formation of a rounding ... Read Answer >>
  3. Are continuation patterns useful in forex trading and stock trading?

    Learn what a continuation pattern is in technical analysis and why it is useful in forex and stock market trading, and discover ... Read Answer >>
  4. How effective is creating trade entries after spotting a Rounding Bottom pattern?

    Understand the basics of the rounding bottom pattern, including formation and interpretation and how this pattern lends itself ... Read Answer >>
  5. What is a common price target when identifying a double bottom?

    Learn how to identify a double bottom stock pattern and where to set a target selling price point to get the most out of ... Read Answer >>
  6. How are Multiple Tops patterns interpreted by analysts and traders?

    Understand how the multiple tops chart pattern is interpreted by traders and analysts and what makes it such a powerful reversal ... Read Answer >>
Hot Definitions
  1. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  2. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  3. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  4. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  5. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
Trading Center