Cup and Handle Chart

Technical Analysis Using Cup and Handle Chart

A technical analysis cup and handle chart is a pattern in which the upward trend has paused but will continue in an upward direction once the pattern is confirmed. It is a bullish continuation pattern that is basically a variation of the double top chart pattern. The cup and handle pattern traditionally forms after a popular stock closes at a new high following a positive fundamental development. Because the stock is surging, investors feel more comfortable paying higher prices for it. Unfortunately, the stock price gets to a point where its story fails to continue to convert believers. When the stock hits this point, it begins to drift lower because the stock’s new believers are now outnumbered by those who are looking to sell and lock-in their profits. Even though the stock is still producing positively, many investors eventually start to question whether or not the stock is really worth the current market price and over time, the value of the stock starts to slowly decline.

Cup and Handle Chart

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Next: Technical Analysis: Chart Patterns - Double Tops & Bottom