Cup and Handle Pattern
- It is a continuation pattern.
- Discovered in 1988 by William O’Neil. I recommend his book How to Make Money in Stocks.
- You need a previous trend in order to have a continuation pattern.
- When the pattern trickles down the “handle” the volume will be slowly declining.
- Once it breaks the “handle,” the volume needs to be very high.
- Remember that the “cup” of the pattern needs to be a “U” shape and not a “V” shape. A “V” shape is likely to be a Double Bottom or a Double Top.
- The “cup” is gradual, it is about a 1/3 retracement from the previous uptrend, and goes back down to re-calibrate itself.
- You want to enter or add to your position when it breaks the “handle.”