How To Trade Top Stocks: 5 Traits Of Proper Handles In A Good Base Investor’s Business Daily

They assist forecast future price fluctuations and offer insights into the actions of market participants. ✅It is difficult to overestimate the importance of the classic continuation and reversal patterns. For a real trader trading on the Forex market, it is huge, because these patterns make it possible to predict the behaviour of the price. ⚠️If one of the trend continuation patterns appears in front of us on the chart, it means that the usual correction… Whenever you are looking at chart patterns and setups, try to think of things creatively.

  1. At its core, learning how to read stock charts and chart patterns comes down to tracking support and resistance.
  2. Typically, they’re investors who bought late, right at the end of the prior uptrend.
  3. During the formation of the cup, buyers gradually regain control, resulting in a recovery of prices.

XTO Energy, now owned by Exxon Mobil (XOM), built a complex handle at the end of September 2002. The base formed as the more than two-year bear market was winding down. The Nasdaq composite, which peaked at 5132 back in March 2000, fell to 1108 by October 2002. The S&P 500 corrected nearly 51% (from 1553 to 768) over the same period. All forms of investments carry risks and trading CFDs may not be suitable for everyone.

You can use those entries to add to your existing position or, in some cases, initiate a new one. Below are examples of winning stocks that launched big runs from the cup-with-handle and cup-without-handle chart patterns. Some services make stock charts overly complex, adding too much non-essential information.

What does a Cup and Handle pattern indicate?

Even he admitted that this pattern isn’t an exact science. Remember, patterns won’t look perfect all the time, and it’s unrealistic to expect them to do so. Patterns help us recognize possible upcoming movements so that we can create trading plans to catch moves that fit our strategies.

If the stock is unable to close above the cloud, then the bears are in control and longs should step aside. Let’s walk through a few chart examples to illustrate the trading strategy. The cup and handle is one of the easiest chart patterns to identify, because we all can recognize a cup. Some of us may not be rocket scientists; however, everyone I know has used a cup in their lifetime.

If the cup is in a V-shape, the reversal will be too sharp of a movement. IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority. This is the part of the quote that is equal to both the buy and sell price.

Cup with handle pattern

A chart pattern called the cup-and-handle appears during an upswing and suggests that price movement may resume in an upward direction. The cup, the handle, and the breakout are its three basic parts. William O’Neil’s CANSLIM method shows better performance than the overall market (S&P 500) in backtests, even though it has lagged in recent years. Although we might argue O’Neil is the innovator of the cup and handle strategy, it’s just one part of many in his methodology. We can’t conclude on the profitability of the cup and handle strategy based on the CANSLIM method. A handle should also form above the stock’s 10-week moving average.

Conclusion: Mastering the Cup-and-Handle Pattern for Effective Trading

This website is using a security service to protect itself from online attacks. The action you just performed triggered the security solution. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. In the market where false signals are readily available, you can essentially use the Ichimoku Cloud to ignore signals, which lack conviction. Call me crazy, but actually using the technicals right in front of my face makes far more sense than applying some universal profit target system.


If it doesn’t, the stock’s momentum may not be enough to break through the higher resistance level. It starts when a stock’s price runs up at least 30% … This uptrend must happen before the cup base’s construction. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools.

For this trade, a profit target will be determined by measuring the vertical distance between the bottom of the cup and the resistance trend line, connecting two highs of the cup. Your Stop Loss needs to be set right under this resistance trend line. To improve your stock investing, focus on stocks showing strength as they climb into new-high ground and break out of a sound chart pattern. After a stock has established a floor of support and built the right side of a chart pattern, it will eventually run into a new ceiling of resistance. Investors new to stock investing may wonder if they should use daily or weekly stock charts.

How to start trading a Cup and Handle pattern?

CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. This is for informational purposes only as StocksToTrade is not registered as a securities broker-dealeror an investment adviser. If you can see what other traders are seeing and determine how they are thinking, you can make smarter decisions and trade more effectively. Look for a roughly 30% downward move, an inverted U-shaped correction, and a bounce handle. A good entry would be when the price breaks above the top of the descending trendline. One of its limitations is the ambiguity of the pattern formation.

As a general rule, cup and handle patterns are bullish price formations. The founder of the term, William O’Neil, identified four primary stages of this technical trading pattern. First, approximately one to three months before the “cup” pattern begins, a security will reach a new high in an uptrend. Second, the security will retrace, dropping no more than 50% of the previous high creating a rounding bottom.

In forex trading, a handle refers to the large number in a currency pair’s price that is not expressed in pips. For example, in the EUR/USD currency pair, the handle is the first two digits of the price, such as 1.20. The handle finexo review is significant because it is the part of the price that is most visible to traders and investors. It is the price that is typically quoted in financial news and analysis, and it can have a significant impact on market sentiment.

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