What Is A Cup And Handle Chart Pattern?

A cup and handle chart pattern is a psychological price and volume pattern with distinct phases which allows a stock to get rid of weak hands in order to enable another leg up.

Characteristics of a proper cup and handle base are as follows:

  • volume dry-up around the bottom larger (above average)
  • blue weekly or daily volume clues at right side
  • Steady and coherent appearance and not too sloppy
  • Biggest weekly bar should be blue, not red!
  • Handle is going sideways
  • Right side is formed more rapidly then left side

Good relative strength compard to general market pattern (v-shaped market >> well rounded cups; Market far away from pivot >> cups reach prior pivot; Jagged market pullback >> quiet sideways handle …)

A cup and handle bases is not about the shape but rather about the little price and volume clues shown above. Generally a proper cup and handle base has a good relative strength compared to the market. When the market itself forms a pattern which is shaped as a proper cup and handle base it makes the formation of proper cup and handle bases on individual stock level vey unlikely as stocks can’t have the relative strength characteristic in such a case.

Here are some examples of proper cup and handle bases:

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Disclaimer: This article is my opinion which stems from my own experience gathered trading real money in the stock market. It represents my style and it fits my personality and risk allowance. More power to you if you are a net profitable trader despite violating everything that’s written above!

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