As of 11/20/2024   Indus: 43,408 +139.53 +0.3%     Trans: 17,002 -26.31 -0.2%     Utils: 1,055 +1.25 +0.1%     Nasdaq: 18,966 -21.33 -0.1%     S&P 500: 5,917 +0.13 +0.0%	YTD  +15.2%    +6.9%    +19.7%    +26.3%    +24.1%	Targets    Overview: 11/12/2024     46,000 or 43,000 by 12/01/2024   18,000 or 16,600 by 12/01/2024   1,075 or 1,000 by 12/01/2024   20,000 or 18,400 by 12/01/2024   6,100 or 5,800 by 12/01/2024
Chart Pattern Indicator: on 11/18/24

As of 11/20/2024   Indus: 43,408 +139.53 +0.3%     Trans: 17,002 -26.31 -0.2%     Utils: 1,055 +1.25 +0.1%     Nasdaq: 18,966 -21.33 -0.1%     S&P 500: 5,917 +0.13 +0.0%	YTD  +15.2%    +6.9%    +19.7%    +26.3%    +24.1%
Targets    Overview: 11/12/2024     46,000 or 43,000 by 12/01/2024   18,000 or 16,600 by 12/01/2024   1,075 or 1,000 by 12/01/2024   20,000 or 18,400 by 12/01/2024   6,100 or 5,800 by 12/01/2024
Chart Pattern Indicator: on 11/18/24

Bulkowski on the Cup with Handle

Lessons added 3/27/24.

For more information on this pattern, read Encyclopedia of Chart Pattern, 3rd Edition. The associated chapter gives a complete review of the chart pattern, compared to what is described below.

Cup with Handle: Important Bull Market Results

The above numbers are based on 913 perfect trades. See the glossary for definitions.

Cup with Handle: Identification Guidelines

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Cup with Handle: Trading Tips

Consult the associated figure on the right.

Trading Tactic	Explanation	The Measure Rule
Measure rule	Measure the height from the right cup lip (A) to the lowest valley (B) then multiply by the above 'percentage meeting price target.' Add the result to the breakout price (A) to get a target.
Inner cup	Cups often form within cups (points 1 and 2), so trade the inner cup when price rises above the handle (the dashed green line at point 3).
Trendline	If possible, draw a down-sloping trendline along the handle peaks. A close above the trendline signals an early buy. I show this as the blue line extending down from point A on the chart to the right.
Buy	Buy when price closes above the right cup rim (point A, and the top horizontal red line).
Stop	The handle low (point C) is a good place to put a stop. Raise the stop as price rises.
Throwbacks	Throwbacks hurt performance.
Short handle	Stocks with handles shorter than the median 22 days show superior post breakout performance.

Cup with Handle: Example

The figure on the right shows an example of a cup with handle chart pattern. The rise leading to the cup with handle begins at C and reaches the left cup lip at point A. Since this is on the weekly scale, the price chart appears narrower than usual, but price rounds downward forming a cup with the right cup lip at B. The handle lasts a few weeks before price begins moving up. The next week, price rockets upward about seven points.

Cup with Handle: Trading Lesson

I looked at 300 cup with handle patterns, stretching from 1990 to March 2024. For this lesson, I used Patternz's List form to find that a significant retrace happens after the handle shows an upward breakout. I found that 47% of the cup with handle patterns dropped substantially within two months of the breakout.

I present the information in slider format, so be sure to click the left or right arrows to view another slide.

Lessons Summary

• Slides 1 to 4. After an upward breakout from a cup with handle chart pattern, 47% of the time, the stock retraces significantly.
• Almost a quarter (23%) of cup with handles see price rise no more than 15% before dropping.

1 / 4

After the cup with handle confirmed as a valid chart pattern, Valaris (VAL) coughed up a fur ball at A. The stock plummeted down to B, busting the upward breakout.

The next chart shows a less extreme example.

2 / 4

This is a chart of Williams-Sonoma (WSM) on the daily scale. The cup with handle breaks out upward and the stock rises to A before retracing to B. It might not look like a big drop but it measures 15%.

The next chart show a recent example.

3 / 4

This is a more recent example (Alarm.com Holdings) of the drop after the cup breaks out upward. The breakout is at A and price drops to B. This is from 2023.

The next slide shows a delay before the drop.

4 / 4

I show this (Allstate) to illustrate how price can rise for a time before plunging. The horizontal green line shows the handle. The pattern confirms when price closes above the line (A). After that, the stock retraces back to the thin blue line (about midway down the handle) before rising to B. Then we see the drop to C.

The end.

❮ ❯

-- Thomas Bulkowski

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See Also

• Cup with handle, inverted
• The rounding bottom is a similar pattern with fewer requirements.
• Have you thought about an ascending scallop?
• Are you hungry? How about some descending scallops?

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