Cup and Handle

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What is it ?

  • a reversal pattern,but more obvious at the bottom rather than at the top.
  • Basically looks like a coffee cup with a handle.
  • There is a basing stage,accumulation phase(cup),then a breakout,followed by a pullback,forming what looks like a handle.
  • Breaking out of the top of the cup is confirmation of a change in trend.

Few criteria

  • The cup should be more rounded than a "V".
  • The handle should be in the top part of the cup,not too deep.
  • Cup pattern should take at least 7weeks to form.
  • Volumes should contract in the handle and expand on b/out.

How to Trade

  • Buy is at the area where the top of the cup is taken out.
  • Stops at the low of the handle.
  • Target : Measure the distance to the low of the cup.Add that to the breakout area.

Reference

StockCharts


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