Cup and Handle

A cup and handle price pattern 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.
A cup and handle is considered a bullish signal extending an uptrend, and is used to spot opportunities to go long.
Technical traders using this indicator should place a stop buy order slightly above the upper trendline of the handle part of the pattern.

The cup and handle is considered a bullish signal, with the right-hand side of the pattern typically experiencing lower trading volume. The pattern’s formation may be as short as seven weeks or as long as 65 weeks.

selling pressure is likely to make price consolidate with a tendency toward a downtrend trend for a period of four days to four weeks, before advancing higher.

It is worth considering the following when detecting cup and handle patterns:

Length: Generally, cups with longer and more “U” shaped bottoms provide a stronger signal. Avoid cups with a sharp “V” bottoms.
Depth: Ideally, the cup should not be overly deep. Avoid handles that are overly deep also, as handles should form in the top half of the cup pattern.
Volume: Volume should decrease as prices decline and remain lower than average in the base of the bowl; it should then increase when the stock begins to make its move higher, back up to test the previous high.

A retest of previous resistance is not required to touch or come within several ticks of the old high;

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.

Alternatively, wait for the price to close above the upper trend line of the handle, subsequently place a limit order slightly below the pattern’s breakout level, attempting to get an execution if the price retraces. There is a risk of missing the trade if the price continues to advance and does not pull back.

A profit target is determined by measuring the distance between the bottom of the cup and the pattern’s breakout level

Limitations Of The Cup And Handle

the cup and handle should be used in concert with other signals and indicators before making a trading decision.
It can take some time for the pattern to fully form,While one month to one year is the typical timeframe for a cup and handle to form
Sometimes the cup forms without the characteristic handle.