Understanding the Cup and Handle Patter

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A cup and handle is a technical analysis pattern that appears on a chart as a U-shaped pattern, followed by a small downward drift, resembling a handle.
It is important to note that like all technical analysis patterns, the cup and handle pattern is not a guarantee of future price movements and should be used in conjunction with other analysis techniques.

Cup and Handle

It is considered a bullish pattern and is often used by traders to indicate the potential for an upcoming price increase.
The pattern is formed when the price of a security falls, reaches a bottom, and then rises back up to near its previous high before falling again. The downward drift that follows is the handle.

• The pattern is considered complete when the price breaks through the resistance level (the top of the cup) and continues to rise. Technical traders using this indicator should place a stop buy order slightly above the upper trendline of the handle part of the pattern.

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Inverted Cup and Handle
After the cup forms and the beginning of a noticeable handle takes shape, begin to monitor trading volume closely.
One way to think of the inverted handle is a follow-up to an inverted cup. The inverted handle retraces the initial move, but not to the level of the original trend.
Once you see a retracement in the form of an inverted handle of the original inverted cup pattern, setting a stop loss while selling the trend could be a potential trade idea.