Cup and Handle Pattern
A chart pattern resembling a rounded bowl (the cup) followed by a small downward drift (the handle), generally interpreted as a bullish continuation signal once price breaks above the pattern's rim.
A cup and handle pattern consists of two parts: a rounded, bowl-shaped price decline and recovery back to roughly the same level (the "cup"), followed by a smaller, brief downward drift or consolidation (the "handle") before price attempts to break higher. The pattern is generally interpreted as a bullish continuation signal, with confirmation typically coming once price breaks decisively above the resistance level formed by the cup's original rim.
The cup's gradual, rounded shape is meant to reflect a gradual shift from selling pressure to accumulation and renewed buying interest, as opposed to a sharp V-shaped reversal, while the handle reflects a final shakeout of remaining sellers before the pattern resolves. Like other chart patterns, the cup and handle is a historically observed formation rather than a mechanically guaranteed signal, and the specific proportions and duration of a genuine cup and handle can vary considerably across different instances.
Examples
- A cup and handle pattern is generally considered confirmed once price breaks decisively above the resistance level formed by the cup's original rim, following the smaller handle consolidation.
- The cup and handle's gradual, rounded shape is meant to reflect a slow shift from selling pressure to renewed accumulation, distinguishing it from a sharper V-shaped price reversal.