What is a cup and handle?
A cup and handle is a chart pattern. It gets its name from the odd shape it makes. The patterns consist of a rise in stock price. Then it swings down and back up forming a round bottom. Finally a handle is made by prices consolidating. When the prices break out it is a buy signal.
In this example the stock goes up to about $14.75. Here it stops and heads down. When it gets to $10.5 it heads up to $15.50. This completes the cup. Then it makes a handle as outlined on the chart. When the stock broke above $14 it gave off a buy signal. As you can see if you would have bought it you would have made some good money.
target It is said that in the target of the cup and handle can be found by adding the difference between the top of the right handle and the bottom to resistance. In this example the difference between the top of the right handle and the bottom of the cup is $15.5-$10.5=$5. Resistance is at $14. So, our target would have been $14+5=$19. This stock over shot that a little, which is a good thing if you were trading the pattern.
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