Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

Statistics updated on 8/17/18

For more information on this pattern, read Encyclopedia of Chart Patterns Second Edition , pictured on the right, pages 149 to 163. That chapter gives a complete review of the chart pattern, compared to what is described below.

Cup-with-Handle

Important Bull Market Results for Cup with Handle Overall performance rank (1 is best): not ranked Break even failure rate: 5% Average rise: 52% Throwback rate: 62% Percentage meeting price target: 62% The above numbers are based on 912 perfect trades. See the glossary for definitions.

Cup with Handle Identification Guidelines

Characteristic Discussion Price trend Upward leading to the pattern. I use a 6-month look back (high to high). If price is higher at pattern start than 6 months ago, then I accept it. Otherwise, I visually check to see it's in a short-term uptrend. I no longer require a 30% upward move. Shape A rounded turn that looks like a cup with a handle on the right. U-shaped cup The cup should be U-shaped, not V-shaped. Handle The cup must have a handle on the right. Cup duration From 7 to 65 weeks Handle duration 1 week minimum with no maximum. Handle Forms in upper half of cup. Cup Cup rims should be near the same price level but be flexible.

Cup with Handle Trading Tips

Consult the associated figure on the right.

Trading Tactic Explanation Measure rule Measure the height from the right cup lip ( A ) to the lowest valley ( B ) then multiply by the above 'percentage meeting price target.' Add the result to the breakout price ( A ) to get a target. Inner cup Cups often form within cups (points 1 and 2 ), so trade the inner cup when price rises above the handle (the dashed green line at point 3 ). Trendline If possible, draw a down-sloping trendline along the handle peaks. A close above the trendline signals an early buy. I show this as the blue line extending down from point A on the chart to the right. Buy Buy when price closes above the right cup rim (point A , and the top horizontal red line). Stop The handle low (point C ) is a good place to put a stop. Raise the stop as price rises. Throwbacks Throwbacks hurt performance. Short handle Stocks with handles shorter than the median 22 days show superior post breakout performance. The Measure Rule

Cup with Handle Example

The figure on the right shows an example of a cup with handle chart pattern. The rise leading to the cup with handle begins at C and reaches the left cup lip at point A . Since this is on the weekly scale, the price chart appears narrower than usual, but price rounds downward forming a cup with the right cup lip at B . The handle lasts a few weeks before price begins moving up. The next week, price rockets upward about seven points.

-- Thomas Bulkowski

Other Cup with Handle Examples