Cup with handle

A cup with a handle chart pattern is a bullish type of pattern.

It’s also considered a continuation pattern since it has the most reliability when it appears after some uptrend.

This chart pattern represents price consolidation. A breakout of resistance should start a new uptrend.

Below you’ll see a typical design of this stock chart pattern.

Another example on XLNX stock chart:

Trading rules

Enter trade after a breakout of the horizontal resistance level . Stop-loss has to be set under this resistance level.

This methodology can define the target. Take the distance between the high and the low of the cup part of this pattern. The distance after breakout of resistance to the target level should be the same.

Include moving averages to your stock chart analysis if you see this chart pattern. Moving averages have to support price action from the bottom side and push the price up.

The shorter the distance between the horizontal resistance price level and moving averages the better the trading setup.

Breakouts can be very explosive when distance is really short. Prices can go up quickly and can reach the target much sooner.