Cup and Handle
The cup
and handle pattern is a well-known chart pattern, which is a continuation setup
for higher prices.
Cup and
handle patterns are found within uptrends, and are named for their appearance
which resembles a cup and handle. This pattern is the result of a resting
period in the stock, with the round cup shape followed by narrow price action
which forms the appearance of the handle. The technical buy point is as
the stock clears the handle area to the upside, ideally on volume expansion.
Context: Found within an uptrend.
Appearance: The cup is rounded, not sharp, and the handle portion is
similar to a flag or pennant with slight retracement to the downside or
horizontal movement (but no upward movement). The cup at the deepest point
will generally have retraced about 30% of the prior price advance.
Breakout Expectation: The height of the cup is the expected gain that
a breakout should achieve, added to the breakout point at the top of the handle.
This example of a cup and handle pattern is
found in QCOM during its tremendous upside run back in 1999. After a very
clean uptrend, this stock rested and formed the cup and handle pattern before
breaking out once again and moving significantly higher.
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