Trading Cup and Handle Reversals and Continuations

Summary

The document describes the cup and handle as both a possible reversal pattern after a decline and a continuation pattern within an existing uptrend. A rounded cup is followed by a pause or pullback called the handle. The proposed long entry occurs when price breaks above the handle’s upper boundary, commonly drawn using trendlines. The handle is expected to retrace no more than about half the cup’s height; a deeper decline is presented as a sign of stronger selling pressure. A stop is placed below the handle low.

For a shorter-term target, the guide adds the cup’s height to the breakout price, while recognizing that a lasting trend change may extend beyond that estimate. It favors continuation setups because they occur within an established uptrend. These are chart-based guidelines, not empirical results: drawing the handle is subjective, and the document provides no tested win rates or discussion of costs. Its claim that reward can exceed risk depends on the pattern and levels being identified as described.

Key ideas

• The pattern consists of a rounded cup followed by a sideways or downward handle.
• A breakout above the handle is presented as a potential long entry for both reversal and continuation setups.
• The guide recommends that the handle retrace no more than about half the cup’s height.
• It places a stop below the handle low and estimates a target by adding the cup’s height to the breakout level.
• Handle boundaries are subjective, and the document provides no empirical performance evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.