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The cup and handle is a bullish continuation chart pattern.
How do you recognise it?
You'll usually see the following, in order:
- An uptrend before the pattern appears
- Price begins to pull back, moving through a series of highs and lows that form the cup
- It rises towards the neckline, then forms a handle, often shaped like a small descending channel
- The pattern is confirmed when price breaks above that channel
The cup and handle also has a bearish version.
Price then forms an upside-down U, followed by a small handle and a downward breakout.
How do you trade a cup and handle?
You can enter long when price breaks above the handle.
To calculate the take-profit, measure the cup's height, from its bottom to the neckline, and project that distance above the breakout point.
The stop-loss can go at the most recent low formed by the handle.
