The cup and handle is a well-known chart pattern that often signals the continuation of an uptrend. Its shape looks like a tea cup seen from the side. It appears on share, crypto and forex charts, usually on daily or weekly timeframes.
The shape
- The cup: price falls from a high, forms a rounded bottom, and climbs back towards the earlier high. A smooth “U” is generally preferred to a sharp “V”.
- The handle: a small pullback or sideways drift near the top of the cup, before a possible breakout.
What the pattern suggests
The cup shows selling pressure gradually being absorbed. The handle is a final shake-out of weak holders. A break above the cup’s rim (the resistance level) is the key event traders watch.
Inverted cup and handle
The mirror image: an upside-down cup followed by a small bounce (the handle). It is generally seen as bearish, with a break below the cup’s base as the key event.
Things beginners should check
- A prior trend for the pattern to continue
- A handle that stays in the upper part of the cup and is not too deep
- Rising volume on the breakout
- A clear plan for where the pattern would fail
Related: rounding bottom pattern and our chart patterns guide.
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This article is for education only and is not investment advice. Trading shares, cryptocurrencies, forex and other markets involves risk, including the loss of capital.