Cup and handle chart pattern How to trade the cup and handle
Like every other trade, you need to know where the stop-loss should be in case things go south. If you have a conservative approach towards trading, consider placing the stop-loss below the lower trendline of the cup’s handle. And if you are willing to take the risk in a more volatile space, you can place the same below the cup’s bottom.
- It works by exiting a trade if the price action begins to go against you.
- The above chart shows how to apply targets to the bullish cup and handle.
- Once the cup forms, the stock price pulls back, forming a “handle” out to the right of the cup.
- Price Data sourced from NSE feed, price updates are near real-time, unless indicated.
- Second, the cup section should look like a U even from a distance.
Opponents of the V-bottom argue that prices don’t stabilize before bottoming and believe the price may drop back to test that level. But, ultimately, if the price breaks above the handle, it signals an upside move. A good time to buy is when the price of the asset moves up and exceeds the price levels seen previously Cup and Handle Pattern at the top of the right side of the cup. Technical analysis focuses on market action — specifically, volume and price. When considering which stocks to buy or sell, you should use the approach that you’re most comfortable with. If you are studying a price action, you should definitely know Cup and Handle formation.
Most Popular Chart Patterns
The rounded structure created by this price movement forms the Cup portion of the pattern. The pattern also has its bearish equivalent, the inverted cup and handle pattern. These pro-trading resources can make your analysis of the cup and handle pattern increasingly concrete. Upon close analysis of the cup, the price correction eventually turns into a bullish price surge, showing that sellers are slowly fizzling out. The upper portion of the cup shows that the buyers are taking center stage, pushing forth a bullish narrative.
Technical traders using this indicator should set a stop-buy order just above the upper trendline of the handle. It is just testing the price action to see whether the bearish trend is strong enough. After the formation of the handle, a bearish breakout happened through the handle. When you spot it on your chart, it’s time to buy or sell the currency pair depending on the potential of the pattern. In some cases, the start of the price decrease and the end of the price increase may diverge in terms of the level that they are supposed to be located at.
Is the cup and handle pattern bullish?
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Once 190 breaks, a deep volume shelf break, free fall upto 175, which is the next volume shelf
Downside Target 175. A trailing stop-lossmay also be used to get out of a position that moves close to the target but then starts to drop again. This pattern can occur both in small time frames, like a one-minute chart, as well as in larger time frames, like daily, weekly, and monthly charts. This is the hourly chart of the USD/CAD Forex pair for March 25-30, 2016.
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Then, you can add the rest of your position size after receiving confirmation of the handle breakout. The “handle” is the relatively flat part of the pattern that develops after the price has rallied back to the prior high and consolidates. https://www.bigshotrading.info/ In this example, the stock RHI had a nice bottom that formed into a deep cup. The important item to note is that the right side of the cup cut through the Ichimoku cloud and even made an attempt at trying to move beyond the cloud itself.
If you trade a bullish Cup with Handle pattern, you should place your stop loss order below the lower level of the handle. If you trade a bearish Cup with Handle your stop loss order should be placed above the upper level of the handle. If the pattern is bearish, the signal should be a bearish break out of the handle. An inverse cup and handle pattern is the exact opposite of what we have talked about. The cup and handle pattern is called so because of its appearance. Most traders often combine multiple indicators to confirm their predictions.