Hot Potato Trader here, what is up fellow trader!
Key Points:
1. Cup with Handle pattern
2. Big Volume Clue at base of cup
3. 33% top of the cup to bottom of cup
4. > 30% increase price in prior uptrend
5. Improving RSI
6. U shape rather than V shape
One of the most important price patterns looks like a cup with a handle when the outline of the cup is viewed from the side. Cup patterns can last from 7 weeks to as long as 65 weeks, but most of them last for three to six months. The usual correction from the absolute peak (the top of the cup) to the low point (the bottom of the cup) of this price pattern varies from around the 12% to 15% range to upwards of 33% (as the case with this chart). A strong price pattern of any type should always have a clear and definite price uptrend prior to the beginning of its base pattern. You should look for at least a 30% increase in price in the prior uptrend, together with improving relative strength and a very substantial increase in trading volume at some points in the prior uptrend.
In most, but not all, cases, the bottom part of the cup should be rounded and give the appearance of a "U" rather than a very narrow "V." This characteristic allows the stock time to proceed through a needed natural correction, with two or three final little weak spells around the lows of the cup. The "U" area is important because it scares out or wears out the remaining weak holders and takes other speculators' attention away from the stock. A more solid foundation of strong owners who are much less apt to sell during the next advance is thereby established.
It's normal for growth stocks to create cup patterns during intermediate declines in the general market and to correct 1 1/2 to 2 1/2 times the market averages. Your best choices are generally stocks with base patterns that deteriorate the least during an intermediate market decline. Whether you're in a bull market or a bear market, stock downturns that exceed 2 1/2 times the market averages are usually too wide and loose and must be regarded with suspicion.
Key Points:
1. Cup with Handle pattern
2. Big Volume Clue at base of cup
3. 33% top of the cup to bottom of cup
4. > 30% increase price in prior uptrend
5. Improving RSI
6. U shape rather than V shape
One of the most important price patterns looks like a cup with a handle when the outline of the cup is viewed from the side. Cup patterns can last from 7 weeks to as long as 65 weeks, but most of them last for three to six months. The usual correction from the absolute peak (the top of the cup) to the low point (the bottom of the cup) of this price pattern varies from around the 12% to 15% range to upwards of 33% (as the case with this chart). A strong price pattern of any type should always have a clear and definite price uptrend prior to the beginning of its base pattern. You should look for at least a 30% increase in price in the prior uptrend, together with improving relative strength and a very substantial increase in trading volume at some points in the prior uptrend.
In most, but not all, cases, the bottom part of the cup should be rounded and give the appearance of a "U" rather than a very narrow "V." This characteristic allows the stock time to proceed through a needed natural correction, with two or three final little weak spells around the lows of the cup. The "U" area is important because it scares out or wears out the remaining weak holders and takes other speculators' attention away from the stock. A more solid foundation of strong owners who are much less apt to sell during the next advance is thereby established.
It's normal for growth stocks to create cup patterns during intermediate declines in the general market and to correct 1 1/2 to 2 1/2 times the market averages. Your best choices are generally stocks with base patterns that deteriorate the least during an intermediate market decline. Whether you're in a bull market or a bear market, stock downturns that exceed 2 1/2 times the market averages are usually too wide and loose and must be regarded with suspicion.
Comment:
Daily close above absolute peak of cup on daily. This is the entry point.