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. CUP

    The ISO 4217 currency code for the Cuban peso, one of two official ...
  2. Rounding Bottom

    A chart pattern used in technical analysis, which is identified ...
  3. Pattern

    In technical analysis, the distinctive formation created by the ...
  4. Double Bottom

    A charting pattern used in technical analysis. It describes the ...
  5. Rounding Top

    A chart pattern used in technical analysis which is identified ...
  6. Diamond Top Formation

    A technical analysis reversal pattern that is used to signal ...
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

    Interpreting the Cup and Handle

    A cup and handle pattern on a bar chart shows a trend in upward performance that trades down and pauses before resuming its upward direction.
  4. 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.
  5. 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 ...
  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. 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.
  8. Markets

    Stock Chart Patterns Playing Out Right Now (WMT, TWC)

    Various chart patterns are playing out in these stocks right now. Here's how to trade them.
  9. Trading

    Analyzing Chart Patterns: Round Bottoms

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com A rounding bottom, also referred to as a saucer bottom, is a long-term reversal pattern that signals a shift from a downtrend ...
  10. Investing

    How Does FIFA Make Money?

    A look at the hugely successful business model of FIFA.
RELATED FAQS
  1. What are the differences between patterns and trends?

    Learn the difference between a pattern and a trend. Explore how technical analysts use patterns and trends to identify trading ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. How effective is creating trade entries after spotting a Multiple Tops pattern?

    Understand the basics of trading based on a multiple tops chart pattern, and learn what elements should be of primary focus ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center