Trading
Charts 101CandlesticksIndicatorsRisk managementAll chart patternsHead and shouldersInverse head and shouldersDouble topDouble bottomAscending triangleDescending triangleBull flagBear flagCup and handleFalling wedgeRising wedgeSupport and resistanceTriple topTriple bottomSymmetrical triangleRounding bottomPennantRectangleAscending channelDescending channelBroadening formationGolden crossDeath crossBart patternWyckoff accumulationWyckoff distributionWhat moves marketsTradingViewMarket cap vs price
The short answer
A rounded recovery followed by a small dip, then a breakout.
What you are looking at
A U shaped base rather than a sharp V, then a short pullback near the old high.
How traders act on it
Traders buy the break above the handle high. The cup depth is the usual target.
Closes, not touches
Wait for a close beyond the level, not a touch. Intraday spikes through a level that reverse before the close are extremely common, and they exist partly because so many stops sit just beyond.When it fails
A deep handle that undercuts the middle of the cup weakens the setup considerably.
Failure is normal and it is not a problem, provided you decided your invalidation level before entering and sized the position so that being wrong is survivable. See risk management.
Context that changes the odds
| Factor | Improves the setup | Weakens it |
|---|---|---|
| Higher timeframe trend | Pattern agrees with the daily or weekly direction | Pattern fights the larger trend |
| Volume | Expands on the breakout | Breakout happens on thin volume |
| Duration | Formed over many candles | Formed over three or four candles, which is mostly noise |
| Level confluence | Trigger sits at a well tested level | Trigger sits in empty space with no history |
| Market conditions | Trending, orderly market | Choppy range, where nearly every pattern fails |
Other patterns
Head and shouldersInverse head and shouldersDouble topDouble bottomAscending triangleDescending triangleBull flagBear flag
Common questions
How long does a cup and handle take to form?
Weeks to months on a daily chart. The shape depends on a slow rounded base, so a cup that forms in two days is a different pattern with the same outline.
What makes a handle valid?
A shallow drift lower, on lighter volume, in the upper part of the cup. A handle that gives back more than about a third of the cup is a warning rather than a setup.
Where to go next
All 26 patternsThe full set with diagrams.Risk managementSizing and stops.CandlesticksThe building blocks.
Practice spotting these
We go through live charts together and separate the real setups from the shapes your brain wants to see. That second skill is the harder one.