Cup with handle
stock chart patterns
Online stock trading tips for trading chart patterns
A cup with 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.
This chart pattern is quite similar to
ascending triangles.
You can use whichever definition you’re familiar with. Another example on XLNX stock chart:
How to trade
such stock chart patterns ?
First you much analyze stock chart and find such horizontal resistance level. It will be some area, it is not only single price point.Then you have to setup appropriate
entry level,
where the breakout prove to be real. Enter trade after a breakout of the
horizontal resistance level
. Where to place stop loss for such breakout trade? It could be little tricky. First we do not want to have too big risk based on our
money management rules
. And second, I found that good trades rarely go too much against, they are mostly right from the beginning. So the appropriate
stop-loss
has to be set under this resistance level and not very far under it. This methodology can also 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.
! My special stock chart patterns trading tip !
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.
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