The Cup-with-Handle Pattern by Gregory Kuhn
Most technically based traders become familiar with the classic chart patterns because those patterns give the trader visual evidence of the demand/supply balance of a stock. Interpreting the chart accurately can give you an early warning about your next trading opportunity. Here, the cup-with-handle pattern, a relatively new chart formation, is examined.
When it comes to charting stock prices, while many chart patterns are best left to a coin toss, some patterns can reveal a great deal about a stock's future price movement. The cup-with-handle formation is one such pattern that indicates a great deal about stock movement. The name coined by William O'Neil, founder of Investor's Business Daily and developer of the CANSLIM trading methodology, the cup-with-handle pattern takes its name from the resemblance the chart pattern bears to the profile of a coffee cup. The cup of the pattern typically forms during intermediate-term market corrections and is usually three to six months in duration but can be as long as 12 months during bear markets or as short as seven weeks during bull markets. The left side of the cup is a downtrend correcting the previous uptrend. The stock price bottoms and begins to advance, forming the right side of the cup.