What is a cup and handle price pattern?

A cup and handle price pattern on a security's price chart is a technical indicator that resembles a cup with a handle, where the cup is in the shape of a "u" and the handle has a slight downward drift. The cup and handle is considered a bullish signal, with the right-hand side of the pattern typically experiencing lower trading volume.

What happens if a cup and handle pattern is confirmed?

If a cup and handle pattern is confirmed, it will usually be followed by a bullish price move upward. You can pick a price target based on the size of the cup, but it becomes much less clear what will happen after the initial breakout from the cup and handle pattern.

What is an 'inverted cup and handle' pattern?

An ‘inverted cup and handle’ is a chart pattern that indicates bearish continuation, triggering a sell signal. Think of it as an upside-down cup and handle. If you look at the regular cup and handle pattern, there is a distinct ‘u’ shape and downward handle, which is followed by a bullish continuation.

How long does a cup and handle pattern take to form?

The cup and handle pattern can take weeks or months to form. Traders use this indicator to find opportunities to buy securities with the expectation that their price will increase. While the cup and handle pattern can be useful as an indicator, there is no guarantee that stock prices will rise. Use a stop-loss to manage your risk.