We have not established any official presence on Line messaging platform. Therefore, any accounts claiming to represent IG International on Line are unauthorized and should be considered as fake. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. Let’s consider the market mechanics of a typical cup and handle scenario.

The handle on the chart is also a good example of a bull pennant pattern. First, many online sources give precise definitions of the cup and handle. “For it to be a cup and handle, the stock has to do this, then this.” Blah, blah, blah. That’s a bunch of blowhards trying to get you to follow them.

Bullish Cup and Handle Trading Example

The easiest way to describe it is that it looks like a teacup turned upside down. It’s a kind of double cup, a clear handle, and a clean breakout. It’s not textbook cup and handle, but the pattern is still obvious. It’s not that there aren’t penny what does a cup and handle chart mean stock patterns — there are. It explains the entire seven-step framework we use to make smarter trades. Proper technical analysis puts the odds of winning in your favor, but you must always be prepared to cut your loss if the pattern fails.

We’ll go over the indicator’s specifics and some of its limitations. In the end, security breaks out again, surpassing the cup depth at its lowest point. In this method, you should extend a Fibonacci tool from the cup low to the high on its right and then connect it to the cup low. Now you will have two points on your chart – one on the right and one on the left. To further your knowledge about patterns, such as head and shoulders patterns and golden cross patterns, and investing in general, check out our blog. IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority.

Bearish Cup and Handle Pattern

It is possible to see the correction of a previous uptrend, and eventually its continuation. The pattern displays clearly defined entry and risk levels, but because volume metrics in the crypto markets are dispersed, it can be challenging to interpret the pattern. The bullish cup and handle formation often signals that a bear market has ended and prices are set to resume their upward momentum. Traders who know how to recognize this pattern may be able to identify entry points in advance and maximize their profit potential during these periods of prolonged uptrends. The cup and handle chart pattern is considered a bullish signal, as it indicates that the price of an asset is likely to continue rising. The pattern is created when the price of an asset forms a cup shape, followed by a brief dip (the handle).

• Sometimes, it is prudent to wait for a breakout above the resistance line established by the highs of the cup.
• “Alternative assets,” as the term is used at Public, are equity securities that have been issued pursuant to Regulation A of the Securities Act of 1933 (as amended) (“Regulation A”).
• The handle resembles an ascending triangle pattern, and the stock saw a sharp increase after the breakout in 2-3 weeks.
• The confirmation of the formation is illustrated with the small green circle when the price action breaks the handle downwards.
• So I don’t go on the hunt for the cup and handle pattern.

Sometimes the cup forms without the characteristic handle. Finally, one limitation shared across many technical patterns is that it can be unreliable in illiquid stocks. Three of the example charts you’ve looked at so far fit the traditional https://www.bigshotrading.info/blog/buying-and-selling-volumes/ time frame. REEMF, PLUG, and NGTF formed a cup over roughly seven weeks. But SOLO formed a messy cup and handle over only three days. A bullish cup and handle pattern is what most people are talking about when they say cup and handle.

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The rally peak established a new high that yielded a pullback retracing 50% of the prior rally, nearly identical to the prior pattern. This time, the cup prints a V-shape rather than a rounded bottom, with price stalling under the prior high. It ground sideways in a broadening formation (second blue box) that looks nothing like the classic handle for another three weeks and broke out. This rally failed to reach the measured move target at 50, calculated by adding the four-point depth of the cup to the resistance line near $46.

Two waves identify a cup and handle formation – the first wave down to form the cup, followed by a second wave with slight retracement before making new highs forming the handle. This strategy places the handle and the stop-loss in the cup’s upper third (or upper half) so that the stop-loss stays close to the entry point, improving the risk-reward ratio. The stop-loss covers the possibility of risk in the trade, while the target represents the likelihood of a potential reward. Investopedia does not provide tax, investment, or financial services and advice. Investing involves risk, including the possible loss of principal.