Cup & Handle
Overview
The cup and handle is a bullish continuation pattern resembling a teacup when viewed from the side. The cup forms as a rounded bottom with the left and right rims at approximately the same level, followed by a small downward-drifting consolidation (the handle). A breakout above the handle's resistance triggers the measured move, calculated from the bottom of the cup to the rim.
Key Concepts
Cup: rounded bottom formation, ideally U-shaped rather than V-shaped. Handle: small pullback or flag formation on the right side of the cup. Volume: decreases during the cup formation, increases on the breakout. Duration: the handle should be no more than one-third the length of the cup. Inverted cup and handle: bearish mirror pattern.
Entry Signals
Enter on a breakout above the handle's upper trendline with above-average volume. Aggressive entry at the lower end of the handle with a tight stop. The handle should retrace no more than 50% of the cup's depth. Confirm with momentum indicators turning bullish at the breakout point.
Exit Signals
Measured-move target equals the depth of the cup added to the breakout point. Place stops below the low of the handle or the midpoint of the cup. Trail stops using the rising handle trendline. If the breakout stalls with declining volume, consider reducing position size.
Best Timeframes
4H, Daily, Weekly
Pro Tips
The most powerful cup and handle patterns form over weeks to months on the daily chart. A V-shaped cup indicates a less reliable pattern because it suggests the market did not adequately absorb supply. The handle should drift slightly downward — a handle that trades sideways or upward is less ideal.
More Topics in This Category
Rounding Bottom
The rounding bottom (also known as a saucer pattern) is a long-term bullish reversal formation characterised by a gradual, U-shaped transition from a downtrend to an uptrend. The pattern reflects a slow shift in sentiment from bearish to neutral to bullish, typically forming over weeks or months. A breakout above the pattern's resistance (the left rim level) confirms the reversal.
Ascending & Descending Triangles
Ascending triangles form when price creates a horizontal resistance line at the top and a rising support trendline at the bottom, indicating buyers are becoming more aggressive. Descending triangles feature a horizontal support floor with a declining resistance trendline, suggesting sellers are gaining control. Both patterns are typically continuation patterns that resolve in the direction of the prevailing trend with a measured move target equal to the triangle's height.
Rectangle Patterns
Rectangle patterns form when price trades sideways between two parallel horizontal lines — a clearly defined support and resistance. Rectangles represent a period of equilibrium where buyers and sellers are evenly matched. The pattern resolves when price breaks decisively through one of the boundaries, often continuing in the direction of the prior trend.
Measured Move Projections
Measured move projections use the length of a prior price swing to forecast the target of the next swing in the same direction. The technique assumes market symmetry — that the second leg of a move will approximate the distance of the first leg. Measured moves apply to impulse waves, corrective patterns, and chart pattern breakouts, providing objective price targets that remove subjectivity from exit planning.