Cup and Handle
A cup and handle is a bullish continuation pattern that looks like a tea cup. Price forms a rounded bottom (the cup), rallies back to previous highs, then pulls back slightly (the handle) before breaking out.
Understanding the Concept
This pattern was popularized by William O'Neil and works well for longer-term trades. The cup shows accumulation—smart money buying the dip gradually. The handle is the final shakeout before breakout. Ideal cups take 7+ weeks to form; handles should be shorter. Volume should be highest at breakout. The measured move target is the cup's depth added to the breakout point. This pattern works on any timeframe but is most reliable on daily/weekly charts.
Real-World Example
Apple stock falls from $150 to $120, forms a rounded bottom over 8 weeks, rallies back to $150, pulls back to $145 (handle), then breaks above $150. Target: $180 ($30 cup depth added to breakout).
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