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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Picture of the head's law.
Chart Patterns: After the Buy
Getting Started in Chart Patterns, Second Edition book.
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Bulkowski's Inverted Cup with Handle

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Candles Chart
Small Patterns
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 02/24/2017
20,822 11.44 0.1%
9,422 86.07 0.9%
699 10.33 1.5%
5,845 9.80 0.2%
2,367 3.53 0.1%
Tom's Targets    Overview: 02/14/2017
21,150 or 20,000 by 03/15/2017
8,800 or 9,700 by 03/01/2017
700 or 640 by 03/01/2017
5,950 or 5,650 by 03/01/2017
2,400 or 2,260 by 03/01/2017
Indus strength: None YTD
Mutt Losers: None YTD
Mutt Winners: None YTD

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 164 to 178. That chapter gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.

The inverted cup with handle pattern is tied for the best performance with high and tight flags in a bear market. In a bull market, the performance is middling; the failure rate is a bit high, and the average decline is meager.

Inverted cup chart pattern
Inverted Cup with Handle Chart Pattern


Important Bull Market Results for Inverted Cup with Handle

Overall performance rank (1 is best): 8 out of 21
Break even failure rate: 11%
Average decline: 16%
Pullback rate: 54%
Percentage meeting price target: 47%

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

Inverted Cup with Handle Identification Guidelines

Price trendJust over half the time, price trends upward leading to the pattern.
Rounded turnLook for a smooth, rounded looking turn (an inverted cup), but allow exceptions.
Cup rimsThe two cup rims should bottom near the same price.
Cup handleTo the right of the cup should be a handle.
Cup retraceHandle must not rise above the cup top but should retrace 35% to 60% of the prior down move.
ConfirmationThe pattern confirms as a valid one when price closes below the right cup lip.
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Inverted Cup with Handle Trading Tips

Trading TacticExplanation
Measure ruleCompute the handle height (the distance between the two red lines in the Measure Rule figure to the right) and then multiply it by the above “percentage meeting price target”. Subtract the result from the price of the right rim low. The result is the price target.
Head-and-shoulders topIf another handle forms to the left of the cup, you might have a head-and-shoulders top chart pattern with a fat head, the shoulders being the cup handles.
ShortWhen price closes below the right rim low, short the stock.
TrendlineDraw a trendline down (if possible) from the handle tops and extend it into the future. When price closes above this trendline, cover your short. I show this in the Trendline figure to the right as price crossing the red line.
Measured move downThe handle may be the corrective phase of a measured move down chart pattern. Use the MMD measure rule to compute a price target.
Yearly lowPerforms best when the breakout is near the yearly low.
Even rimsWhen the cup rims bottom at the same price, the chart pattern tends to perform better than do those with uneven rims. The Trendline figure shows this as the even lows at A and B.
PullbacksPullbacks hurt post breakout performance.
The measure rule for inverted cup with handle chart patterns
The Measure Rule

Covering a short trade method


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Inverted Cup with Handle Example

Inverted cup with handle chart pattern example

The above figure shows an example of an inverted cup with handle chart pattern (in red). Price makes a gentle rounding turn, forming the inverted cup. Following the cup is the handle, a flat region in this example that stretches from March and into April. Price jumps upward for several weeks and creates another inverted cup (in green) before starting a new trend downward.

-- Thomas Bulkowski

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See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. A computer's attention span is as long as it's power cord.