Cup with Handle Pattern
Learn to recognize and trade a cup with handle pattern through interactive charts.
What is a cup with handle pattern?
A cup with handle is a bullish chart pattern, which suggests that the price is about to resume its uptrend after consolidating.
Download our free chart patterns PDF for a guide to 20 classical chart patterns with over 100 interactive charts, also on TradingView.
The cup can develop over 1 to 6 months, and sometimes longer. The handle should ideally complete within 1 to 4 weeks.
This pattern consists of a U-shaped base, often followed by a downward-sloping trading range, which resembles a handle.
- This pattern forms after a strong move up in price, usually 30% above the prior base.
- You can then expect the price to retrace between 12% and 33% from the top. However, in volatile markets, the price can correct between 1.5 and 2.5 times the change in broad market indices (e.g. S&P 500 or the Nasdaq).
- The base of the cup should resemble a 'U', rather than a 'V'. This allows for consolidation, as weak hands and speculators unwind their positions, before new buyers start driving the price up.
- Once the cup completes, it’s typical but not essential for the price to move downwards, by up to 10%. At times, this pattern can resemble a flag or pennant. But it can also take the form of a shorter pullback. This pattern is known as the handle.
Look for one to two weeks of tight trading ranges and declining volumes in the cup and handle. Wide spreads suggest a stock is in the market's eye and breakout could fail.
Cup with handle trading tips
Wait for the price to break convincingly above the handle to open a long position. Some traders wait for a break above the resistance line that runs through the highs of the cup. The breakout should be accompanied by rising volumes. The greater the volume, the stronger the pattern.
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About the author
I'm Stéphane, a trader and an entrepreneur. My mission with TrustedBrokers is to help you find the right broker for you, whether you're a beginner or a pro. I've personally used and tested the brokers on our service, opening and funding real-money accounts, contacting customer service and placing trades. I started my career in investment banking in London.