11# Cup and Handle (Continuation Pattern)
Exit position with NYSE: Add this result to the high at the right lip where the breakout occurs and the resulting number will be our target. Sometimes it is prudent to wait for a break above the resistance line established by the highs of the cup. What do you think? The softer "U" shape ensures that the cup is a consolidation pattern with valid support at the bottom of the "U".
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The competition starts on October 1. Things to know about the contest: The handle is a relatively short period of consolidation. The full pattern is complete when price breaks out of this consolidation in the direction of the cups advance.
The price will likely continue in that direction though conservative traders may look for additional confirmation. The target can be estimated using the technique of measuring the distance from the right peak of the cup to the bottom of the cup and extending it in the direction of the breakout. A common stop level is just outside the handle on the opposite side of the breakout.
The Inverted Cup and Handle is the bearish version that can form after a downtrend. TradingView has a smart drawing tool that allows users to visually identify this pattern on a chart.
The recent analyst day was great, in my opinion, with strong product pipeline which should be followed by strong delivery. Guidance is up and most likely conservative going into next month's earnings call. Short term headwinds with regards to overbought status should dissipate soon as Tandem is far from being overbought. It has a strong chance of becoming a market The cup and handle pattern can be found in any time frame, however, it is advisable to only trade the cup and handle patterns on time frames of above H1 as these are more valid to trade.
Here, we can notice how price declined to form a bottom and start to rise gradually upwards. The main points of interest are the first support level that forms the left side of the cup which gave way for steep declines.
On the rally back, this same level now acts as resistance and therefore prices react in the first attempt and drop back lower. As with the above example, the ideal point of entry to trade this pattern is the break out of the small handle or down sloping channel.
If you look closely at the handle, it is nothing but a bullish flag pattern, which, as we know is a continuation pattern. Therefore, taking long positions on break out of this handle or flag pattern with stops below the most immediate dip before the rally could see a very low risk trade in regards to the high profit potential the cup and handle pattern can represent.
The only problem with the cup and handle pattern is that does not appear that frequently and therefore, there may not be many trade opportunities coming your way. An alternative way to find out the cup and handle patterns is to first spot the bullish flag and immediate scan to the left of the chart. If you notice a rounding bottom price pattern, make use of the drawing tools to see if the cup and handle formation can be validated and then identify the support level.