The last thing you want to do is short the market because it’s likely to breakout higher. So make sure you don’t forget to place a stop-loss order above the top of the handle. But this doesn’t mean that you will enter a short position immediately once you spot this chart pattern. The breakout was confirmed when prices broke down from this level. Think of it this way – if you know exactly when to enter the market, you could earn 50% or more in a single year. That’s the kind of returns you can achieve with this powerful chart pattern.

• Day Trading is a high risk activity and can result in the loss of your entire investment.
• As more bears come, the price moves lower to a certain point.
• This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you.
• The handle part forms when the stock price falls back to a level just below the cup.
• We also want the pivot to be approaching the left cup level, so we require the pivot price to be at least 60% of the left cup.
• When the price breaks out of the handle, the pattern is considered complete, and the price is expected to rise.

Check out this step-by-step guide to learn how to scan for the best momentum stocks every day with Scanz. Here are 3 ways you can get fresh, actionable alerts every single day. Get Started Learn how you can make more money with IBD’s investing tools, top-performing stock lists, and educational content. For the weekly chart, the moving-average line traces 10 weeks’ worth of turnover. An upward-sloping handle is flawed; it represents weak demand as new buyers move into the stock at a trickling pace. During the stock’s actual breakout, you want to see a new wave of buyers coming in at a torrid pace, not a trickling one.

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This means it could be the start of a NEW uptrend and the last thing you want to do is cut your profit short. Now, you don’t want to put your stop loss at the exact low of Cup and Handle Pattern the handle because the market could trade into that area of value and reverse higher. The good thing about waiting for the close is it’s less prone to false breakout.

Patterns with shorter handles have a higher success rate than patterns with longer handles. The traditional https://www.bigshotrading.info/ buy point is a breakout above the high of the handle, which clearly puts bullish momentum on your side.

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We tested 700+ combinations of trend, signal, and lookback period to deliver to you a comprehensive RSI signal database. Your results may differ materially from those expressed or utilized by Warrior Trading due to a number of factors. We do not track the typical results of our past or current customers.

Our daily swing trading report, The Wagner Daily, also highlights top cup and handle patterns as they develop. Yes, the cup and handle pattern is a bullish signal, with the right-hand side of the pattern typically experiencing lower trading volume. The pattern’s formation usually signals an impending rise in the stock price. The second example is another classic cup and handle pattern that develops over three to four months, with the handle forming over approximately two weeks. The cup retraces slightly more than half the preceding movement, which is relatively mature prior to the cup and handle pattern’s formation. The right side of the handle rises higher than the left and the pattern slightly overestimates the extent of the bullish continuation after the breakout. Cup and handle patterns can also occur on shorter timeframes, although trading these requires quick recognition and confirmation of the breakout at the end of the handle in order to profit.

What does a cup and handle pattern indicate?

This top chart pattern is a favorite among swing traders, who have been relying on this pattern for decades to spot potential opportunities for profit. A Cup and Handle can be used as an entry pattern for the continuation of an established bullish trend. The cup has a soft U-shape, retraces the prior move for about ⅓ and looks like a bowl.