The Cup with Handle is a bullish continuation pattern that marks a consolidation period followed by a breakout. As its name implies, there are two parts to the pattern: the cup and the handle. The cup forms after an advance and looks like a bowl or rounding bottom. As the cup is completed, a trading range develops on the right hand side and the handle is formed. A subsequent breakout from the handle's trading range signals a continuation of the prior advance. 1. Trend: To qualify as a continuation pattern, a prior trend should exist. Ideally, the trend should be a few months old and not too mature. 2. Cup: The cup should be "U" shaped and resemble a bowl or rounding bottom. The perfect pattern would have equal highs on both sides of the cup, but this is not always the case. 3. Cup Depth: Ideally, the depth of the cup should retrace 1/3 or less of the previous advance. 4. Handle: After the high forms on the right side of the cup, there is a pullback that forms the handle. 5. Duration: The cup can extend from 1 to 6 months 6. Volume: There should be a substantial increase in volume on the breakout above the handle's resistance.
Chart Analysis
