cup and handle reversal

However, an aggressive trader may take a position at the Handle. Traders take their long positions when the price breaks the resistance level. When the price breaks-free from the Handle, the price is expected to go higher. A continuation pattern is formed when there is a prior uptrend, followed by a consolidation in the form of Cup cup and handle reversal and Handle pattern and then the uptrend continues post-breakout. The cup and Handle pattern is one of the most important chart patterns to make money in the stock market. A conservative price target can be achieved by measuring the height of the handle and adding it above the resistance level at the top right-side of the cup.

The cup and handle is an excellent tool to build a trading strategy around, providing clear structure rules, measurable risk, and reward. We’ll dive into the details of how to spot the inverted cup and handle and take advantage of it. This is useful when trading both the cup and handle and the inverted cup and handle, because you can speculate on upward or downward price movements. We want to clarify that IG International does not have an official Line account at this time. We have not established any official presence on Line messaging platform.

How to Trade the Inverse Cup and Handle

With this in mind, you can trail your stop loss on the previous swing low because if the market wants to continue higher, the previous swing low shouldn’t be “broken”. This means it could be the start of a NEW uptrend and the last thing you want to do is cut your profit short. If you ask me, it’s when the price breaks below the low of the handle, thereby invalidating the Cup and Handle pattern.

Sugar also got hit by the bear market, producing meaningful corrections during the downtrend. The daily chart below shows the inverted cup and handle that has formed for over two months, culminating in a breakout. Another issue has to do with the depth of the cup part of the formation.

Advanced trading technique: How to enter the breakout BEFORE the breakout

Some traders consider that pattern a harbinger of a downtrend in the asset’s price that helps identifying selling opportunities. Most of the same general rules, such as the handle not exceeding 1/3rd of the cup, still apply. The price of the asset is expected to drop after the pattern formation is complete. Sometimes it forms within a few days, but it can take up to a year for the pattern to fully form.

Akamai Technologies, Inc. (AKAM) consolidated below $62 after pulling back to major support at the 200-day exponential moving average (EMA). It returned to resistance in early February of 2015 and dropped into a small rectangle pattern with support near $60.50. This rectangular handle held well above the 38.6% retracement level, keeping bulls in charge, ahead of a breakout that exceeded the measured move target and printed a 14-year high. The cup and handle pattern is a trading pattern that can be analysed in all financial markets. The cup and handle formation is created when the price of an asset falls but then makes its way back up to the point where the fall started.

Cup with handle pattern

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. If you’re not ready to start straight away, you can practise your trades on a risk-free demo account. The 3 best trading strategies that you can use to identify and trade the inverted cup with handle.

A Cup and Handle pattern is a chart pattern that takes the shape of a cup with a handle. It is a trend continuation chart pattern and can be bullish or bearish, depending on the trend where it is formed. In an uptrend, it is bullish, while in a downtrend, it is bearish.

How Do You Find a Cup and Handle Pattern?

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning. In both scenarios, the context is very different, but the pattern is the same, and can be traded in exactly the same way. We are opposed to charging ridiculous amounts to access experience and quality information. If you’ve looked for trading education elsewhere then you’ll notice that it can be very costly.

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