Cup and Handle Chart Pattern
The cup and handle chart pattern is a bullish continuation pattern that marks a consolidation period followed by a breakout. It can help to predict future price movements.
A cup and handle chart pattern is comprised of three main components:
-A prior trend, as to qualify as a continuation pattern it has to have a prior trend
-The cup, "U" shaped resembling a bowl or rounding bottom with almost equal heights on the either side
-The handle, as the cup formation is completed, a trading range develops on the right-hand side forming the handle, usually 1/3rd of the size of the prior advance
In this chart pattern, there is a prior trend followed by a cup forming with almost of the equal heights on either side with a low in observed nearly in the middle. After the low, the rice consolidates to reach near the high of the start of the cup, followed by a pullback forming a handle, similar in shape to a flag or pennant. Once the handle reaches back to the same level of the cup highs, a breakout is expected, confirming with spikes in the volume observed.
Traders can use the cup and handle to buy when the breakout is observed i.e. at the candle when price breaks the highs formed by the cup. For confirmation, traders can use the sudden increase in volume as the cup and handle completes and the breakout is observed. Traders can put stop loss at the low of the handle in order to minimize the losses if the pattern fails,
There are few limitations as well to the Cup and Handle Pattern:
-Can be difficult to be observed for novice traders
-Often might require assistance from other technical indicators
-The cup and handle might take extensive periods to play out and complete the formation
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If you find the post useful, please like and share our ideas with the community!
- Mudrex
The cup and handle chart pattern is a bullish continuation pattern that marks a consolidation period followed by a breakout. It can help to predict future price movements.
A cup and handle chart pattern is comprised of three main components:
-A prior trend, as to qualify as a continuation pattern it has to have a prior trend
-The cup, "U" shaped resembling a bowl or rounding bottom with almost equal heights on the either side
-The handle, as the cup formation is completed, a trading range develops on the right-hand side forming the handle, usually 1/3rd of the size of the prior advance
In this chart pattern, there is a prior trend followed by a cup forming with almost of the equal heights on either side with a low in observed nearly in the middle. After the low, the rice consolidates to reach near the high of the start of the cup, followed by a pullback forming a handle, similar in shape to a flag or pennant. Once the handle reaches back to the same level of the cup highs, a breakout is expected, confirming with spikes in the volume observed.
Traders can use the cup and handle to buy when the breakout is observed i.e. at the candle when price breaks the highs formed by the cup. For confirmation, traders can use the sudden increase in volume as the cup and handle completes and the breakout is observed. Traders can put stop loss at the low of the handle in order to minimize the losses if the pattern fails,
There are few limitations as well to the Cup and Handle Pattern:
-Can be difficult to be observed for novice traders
-Often might require assistance from other technical indicators
-The cup and handle might take extensive periods to play out and complete the formation
----------------------------------------------------------------------------------------
If you find the post useful, please like and share our ideas with the community!
- Mudrex
