3 methods for the way to Trade the Cup and Handle Pattern

Home / 3 methods for the way to Trade the Cup and Handle Pattern

The cup and handle pattern is one in all the oldest chart patterns you’ll realize in technical analysis.  In my expertise, it is also one in all, a lot of reliable chart patterns, because it takes quite a while for the formation to set up. during this article, I will be able to cowl three ways for a way to trade cup and handle patterns that you just won’t realize anyplace else on the net.

Cup and Handle Definition

The cup and handle area unit one in all the simplest chart patterns to spot as a result of we have a tendency to all will acknowledge a cup. a number of United States of America might not be rocket scientists; but, everybody I do know has used a cup in their time period.

Method #1 – Trade the sturdy Handle

When you area unit day commercialism cup and handle patterns, you want to understand that not all handles area unit created equally.  The funny factor concerning the formation is that whereas the handle is that the smallest portion of the pattern, it’s really the foremost necessary.

The handle is that the catapult or catalyst, which might send a stock screaming higher.  My favorite setup for the cup and handle pattern is one with the subsequent sturdy handle characteristics:

On a 5-minute timeframe, the handle is formed of a minimum of four candlesticks, however, no quite ten. the explanation I prefer to time box the handle is as a result of I need to avoid the situation of being tried in a very sideways riddle.

The candles of the handle ought to have tiny bodies and in an exceedingly very tight vary.

The jailbreak ought to turn out important volume and value enlargement.

The jailbreak candle has to shut on top of the resistance line of the handle

I like to decision this the sturdy handle jailbreak because the pattern is displaying important strength in terms of value action, volume and speed.

Method #2 – Sell the availability Line

What if I told you that taking the depth of the cup and adding it to the jailbreak price is that the wrong thanks to set your value target.  Feels a trifle wrong expression it aloud does not it? each book and diary you’ll be able to realize on the net can enlighten simply sell once this matched quantitative relation is achieved.  This approach might have worked throughout a time once there have been few individuals playacting technical analysis, however, today the market will not let your stock create it’s nice very little run to your most well-liked value purpose.

What if there was in a different way to line your target, which might account for the particular pattern you’re trading? to easily apply constant value target logic to each stock formation within the market sounds a little off, once you rely on it.  The market is rarely that cut and dry.

What I’m proposing, is that rather than victimization the depth of the cup as your target, however concerning victimization trendlines?

See, that wasn’t too radical of an inspiration.  The last time I checked, merely drawing a line up within the air means that completely squat. do not believe me; explore the chart below.

The unhappy factor is that the pattern was sound, however, the profit target virtually appears like you’re recreating shelves in my room.  It simply does not add up to ME to line your targets this manner.

Call ME crazy, however really victimization the technicals right before of my face makes much more sense than applying some universal profit target system.

Method #3 – obtain on the Cross of the Cloud

For the needs of this text, I need to introduce you to the thought of shopping for the cup and handle jailbreak once the holder closes on top of the Ichimoku cloud.  For those unfamiliar the indicator, if the stock is ready to shut on top of the cloud convincingly, this can be an extra confirmation of the strength of the trend.  If the stock is unable to shut on top of the cloud, then the bears area unit au fait and longs ought to step aside.


Trading the cup and handle pattern goes back decades. the matter with the setup is that everybody uses constant approach once deciding entry and exit for the formation.

Whenever you’re gazing chart patterns and setups, try and consider things creatively. strive applying contradictory methodologies or commercialism indicators to envision if you can not unearth a grip. keep in mind during this line of labor, you only have to be compelled to be a trifle bit higher than consecutive bargainer to form a living.

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