Cup and handle chart pattern How to trade the cup and handle IG International

cup and handle reversal

The last thing you want to do is short the market because it’s likely to breakout higher. To form the handle, the price must approach Resistance and form a tight consolidation . A trailing stop-loss may also be used to get out of a position that moves close to the target but then starts to drop again. If the stop-loss is below the halfway point of the cup, avoid the trade. Ideally, it should be in the upper third of the cup pattern. The price of an asset will gradually decline until it hits its lowest point at a stable course.

cup and handle reversal

The image illustrates the way a bearish Cup and Handle pattern could be traded. The stop loss order of this trade needs to be placed below the lowest point of the handle.

Continuation Pattern vs Reversal Pattern

Forex Pops Provide Free MT4 indicators and tools for help all beginners. The stop loss order of the trade needs to be placed above the handle. Its location is shown with the red horizontal line on the chart. Drawing the Cup and Handle pattern might seem tricky at times. The reason for this is that the pattern cannot be drawn with a straight line. Due to the rounded bottom of the pattern, you should use a curved drawing tool. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence or obtain advice where necessary.

  • Prices change direction by retracing upward and then falling back to the support price level established by the low of the right lip of the cup.
  • For example, if a cup forms between $99 and $100, the handle should form between $100 and $99.50, ideally between $100 and $99.65.
  • At this point, an investor may purchase the stock, anticipating that it will bounce back to previous levels.
  • Take the right side of the cup afterwards and draw the shape of the bullish handle.
  • The price of an asset stays at its lowest point for a period of time forming the base of the cup.

The bottom of the cup should be clearly rounded, and V shaped bottoms typically do not qualify. A cup and handle pattern can fail in any market where it forms. Below are visual examples of failed cup and handle chart patterns on the price charts of various markets. A buy signal is triggered when prices surpass the high of the right side of the cup. Cup and Handle Reversal Pattern is a technical analysis pattern which can be found in stocks, futures, currencies and other financial markets.

Trading the Cup and Handle Pattern for Best Results

Unless otherwise indicated, all data is delayed by 15 minutes. The information provided by, Inc. is not investment advice. That small pause gives us a good low risk opportunity to get into the trade to ride the next wave of uptrend. Do note that the pause may not always be a flag, sometimes it might take other forms, but the idea is the same. In cup and handle reversal the diagram below, you can see that the price pattern consists of a larger accumulation base , before forming a smaller accumulation base , before finally leading to a breakout. The cup and handle is an accumulation buying pattern, which is found during long periods of consolidation, and can lead to powerful explosive moves once the pattern is fully completed.

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