How is The Cup & Handle Pattern Formed And Traded?

How is The Cup & Handle Pattern Formed?

1. Price makes an impulsive move

2. The correction phase starts after that and we can see a very low volume as the price barely moves.

3. The correction takes the form of a "U" letter.

In general, the model looks like a spoon.

4. The "U" correction usually ends when the price tests the top of the previous structure again. This is the moment when the price starts to create the handle.

5. Once the price finds resistance/support, a small correction process is ready to begin again.

At this point, we can see the Handle being formed.

Typically, the HANDLE is a small flag that is formed when the "U" correction is completed.

6. A price breakout from the previous top/bottom of the structure would indicate the continuation of the major trend.



Types of Cup & Handle Pattern

When The Cup & Handle Pattern is completed in a Bullish Trend it is classified as a "Bullish Trend Continuation Pattern"

When The Cup & Handle Pattern is completed in a Bearish Trend it is classified as a "Bearish Trend Continuation Pattern"

Targets
A minimum profit target for this pattern is the measured distance between the bottom and top of the cup.
This distance is added to the price in the sharing area.
This is the minimum profit target that applies to this model and we should know that the price may also continue the movement of the major trend.

Thank you, Good Luck & Never Give Up

Comment:

Real example on the chart AUDCAD: