Cup With Handle, what does it mean in technical analysis?
A Cup With Handle chart pattern (Cup With Handle) resembles a cup of coffee with a cup (half circle) and handle (downward trading pattern). It is a bullish continuation pattern that marks a break (sideways trend) in the bullish trend. The entire pattern can last anywhere between one month to a little more than a year. The handle should generally be from a quarter to a little less than half the length of the cup. The cup should be well rounded, it can be quite steep but should not be so abrupt that it looks like a V. Nor should it be so flat that it could be mistaken for a straight line. The handle should be a fairly narrow downward or flat trend. The cup and handle should always start with an upward trend. The height of the cup and the initial up-trend are also important to have a successful cup and handle pattern. The height of the cup should be approximately between one third (1/3) to two thirds (2/3 of the initial uptrend). For example, if we have a stock that initially moved from 20 to 30 crowns and then started creating a cup, the height of that cup should be between about 3.3 (1/3 * 10) and 6.6 (2/3 * 10).
As with most technical analysis patterns, there are guidelines to indicate the strength of the trend. 1. The closer it is to a nicely rounded cup, the stronger the trent 2. The “handle” can only convert to a breakout when there is strong volume.
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