Is this the most powerful bullish continuation chart pattern? Probably, it is.
However, when it comes to how to trade it more profitably, only a few traders
know and figure out how to trade the Cup-And-Handle chart pattern like a pro.
This text will help day and swing traders, position traders and investors
conquer the challenges of trading this pattern profitably.
The theory of the Cup-And-Handle
Most traders know that theory, but are often bored with it because all they do care
about is how to pull off consistently profitable trades. Nevertheless, the theory has
its place if one clears the misconceptions.
To help traders comprehend or make a better sense of the theory, one should note that
a bullish chart pattern often takes place on or near a critical support level, at the end
of a downtrend or bearish target level and during a bullish trend.
Therefore, it is vital to ascertain that the Cup-And-Handle chart pattern is at the
appropriate location before one begins any technical analysis.
Theoretically, the Cup-And-Handle chart pattern is always formed during a bullish
trend. However, in no-nonsense trading, that is often the case, but it is not each time true.
Look at the chart below that is exhibiting a Cup-And-Handle chart pattern at the end
of a downtrend.
View the chart chart below
Image = "Electronic Arts Inc. (EA) stock is exhibiting
a cup-and-handle chart pattern at the end
of a downtrend"
Does that refute the general belief?
Maybe. Does that nullify the Cup-And-Handle theory? Not at all. The take away
is the primary occurrence of the Cup-And-Handle chart pattern is during a bullish
trend but not always.
The theory also stated that the cup of the Cup-And-Handle chart pattern should be
a nicely rounded or be similar to a semi-circle. In the old days, that was the case,
but nowadays, one will see more V-shaped cup than a semi-circle or rounded cup.
One should also retain that there are two components of the Cup-And-Handle chart
pattern: the cup and handle. In reality, the cup may be a round bottom, V pattern or
even a messy pattern without a name.
In general, the bottom of the handle should not dip below the 61.8% Fibonacci retracement
level of the height of the Cup-And-Handle chart pattern. Indeed, a deep retracement
will alter the bullish sentiment to some extent because the fifty percent Fibonacci
retracement is a psychological price level (a thin dividing line between the bullish
zone and bearish).
Contrary to the Cup-And-Handle theory, there are times when the handle will pierce
through the 61.8% Fibonacci retracement level without nullifying the bullish momentum.
View the chart below
Image = "Netflix Inc (NFLX) stock is displaying a cup
that dips below the mandatory 61.8% Fibonacci
retracement level of the prior bullish price-action."
To determine the next price target after the price breaks above the handle, traders use
the height of the cup and project it above the neckline.
View the chart below
Image = "A pink vertical line that is the depth of the
cup-and-handle determines the potential price target"
Though the initial target is the ultimate target, day and swing traders also set a
secondary target at the midpoint of the initial target.
The Handle Of The Cup-And-Handle
The first thing that comes to the mind of most day and swing traders when the cup is
completed is the double-top chart pattern because it has formed two equal tops. Indeed,
those who saw a double-top chart pattern would try to sell the asset. Subsequently, that
would create the handle of the Cup-And-Handle chart pattern.
In normal conditions, the handle of the Cup-And-Handle is below the neckline.
However, there are circumstances where the handle is above the neckline.
Furthermore, a dynamic bullish security may not exhibit the handle due to the lack of
demand to sell the asset at the time when the cup is in place.
View the chart below
Image = "Amazon.Com Inc stock chart illustrates a
cup-and-handle chart pattern without a handle"
In general, a dynamic bullish stock can exhibit no handle at all during the formation of the
Cup-And-Handle chart pattern or display the handle above the neckline contrary to the theory
of the Cup-And-Handle chart pattern.
How To Trade The Cup-And-Handle Chart Pattern Like A Pro?
There are more to the Cup-And-Handle chart pattern when it comes to practical day or swing
Ninety percent of day of swing traders know about the continuation chart patterns or in this
case the cup-and-handle chart pattern, but still could not avoid common trading mistakes.
The objective of this technical trading video is to shed more light onto that powerful bullish
continuation chart pattern (Cup-And-Handle) and most importantly help day and swing
traders or investors understand the correct strategy for trading the Cup-And-Handle chart
pattern like a professional.
We recommend to traders and investors to watch the full length of this tutorial, and test each
strategy until they master it.
Watch, rate and share this video tutorial today.
Cookies help our advertisers to provide, protect and improve their services.