What is a cup and handle pattern?

A cup and handle pattern is a technical analysis indicator that occurs when the price chart for an asset resembles a U-shape with a horizontal line, generally drifting downward, like a teacup. It is a bullish continuation pattern which means that it is usually indicative of an increase in price once the pattern is complete.

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.

What is the inverted cup and handle pattern?

The Inverted Cup and Handle is the bearish version that can form after a downtrend. TradingView has a smart drawing tool that allows users to visually identify this pattern on a chart. The cup and handle pattern is a continuation chart pattern that looks like cup and handle with a defined resistance level at the top of the cup.

How to trade a cup and handle?

There are several ways to approach trading the cup and handle, but the most basic is to look for entering a long position. The image below depicts a classic cup and handle formation. Place a stop buy order slightly above the upper trend line of the handle. Order execution should only occur if the price breaks the pattern’s resistance.