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So, now let’s find out the reason by understanding the psychology behind the formation of the cup and handle pattern. But when it comes to the formation of the pattern on a chart, there is so much involved in it. So, without further delay, let’s explore everything about the cup and handle pattern.

Most Important Candlestick Chart Patterns

However, a “V” shaped cup also qualifies as a Cup and Handle pattern but the conviction is higher in “U” shaped due to the consolidation at the bottom. This can be formed in any timeframe from a few minutes to weekly and monthly charts. However, the higher the timeframe, the better the chances of success post-breakout. Cup and Handle patterns can be seen both as bullish continuation or reversal patterns.

Usually the pullback is about 1/3rd of the size of prior advance. The cup depth is usually up to 1/3rd of the edge prices, but it can go even ½ deep from the edge price in extremely volatile conditions. This is an exclusive story available for selected readers only. GMR Infrastructure, part of the transport infrastructure group, hit a fresh 52-week high after recording a breakout from a Cup & Handle pattern earlier in April 2023. This website is using a security service to protect itself from online attacks. The action you just performed triggered the security solution.

Cup and Handle Pattern Formation

The index witnessed a breakout from the pattern along with a gap up which confirmed further strength. These patterns are nothing but simple tools that work in understanding trading through technical analysis. Cup and Handle pattern is one of the most important chart patterns to identify multi-bagger stocks. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days.

• Traders might even consider taking a long position when the asset breaks the line of resistance of the cup and handle pattern.
• Some of the bullish chart patterns are Head and Shoulder, Double Bottom, Cup and Handle, Flag pattern, Falling channel, Ascending triangle, among others.
• The stop-loss should be at a level that is below the lowest point of the handle.
• A cup and handle is a popular chart pattern among technicians.
• The reflection of human emotions is seen in the chart and the formation of the handle takes place.

Here you need to add the height of the cup and add it above the resistance level. In this case, the height of the cup is Rs. 15 (Rs. 60 – Rs. 45). Because of selling pressure, the stock forms a handle and hits a low of Rs. 50.

Cup And Handle Pattern in Stock Market

The stop-loss should be at a level that is below the lowest point of the handle. Is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

No worries for refund as the money remains in investor’s account.” Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Cup with handle pattern formed in Gabriel India dally, chart.

Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020. Metals were in a strong uptrend too, it’s always good to look at the index a stock belongs to. This is a real example of ‘Cup and Handle Pattern’ formation. Once you spot the pattern on the chart, you wait for a breakout which should be backed by higher volume.

The size of the cup even when I measure it, it is not the same between between the cup and handle resistance and the 2nd target. The entire cup and handle pattern is nothing but a ‘correction’– allowing the fundamentals to catch-up before starting a fresh move upwards. After the price corrects, it remains in a range as there is both buying and selling pressure. Meanwhile, the fundamentals also begin to move closer to the price. Handles are often lateral or descending channels or triangular in shape.

What is Cup and Handle Pattern?

An Inverse Cup and Handle Pattern is considered to be a bearish continuation pattern which is used to identify bearish breakouts. We all know by now, you must place a trade after the stock breaks out of the resistance level and closes above it for a few days. In this case, you can enter into the position above Rs. 60. Volume should decrease during the formation of the pattern and there should be an increase when breakout/breakdown happens after the formation of the handle. The ‘Cup and Handle’ is a pattern which forms on the chart when a rising stock – goes through both price correction and time correction. The Cup is usually “U” shaped and may be considered as a rounding bottom with almost equal highs on either side.

If you come across any individual or organisation claiming to be part of Enrich Money and providing such services, kindly intimate us immediately. Stock brokers can accept securities as margins from clients only by way of pledge in the depository system w.e.f September 01, 2020. The stock of GMR Infra has shown impressive resilience, consistently maintaining a level above Rs 34, a threshold that was breached for the first-time post June 2014. RSI below 30 is considered oversold and above 70 is considered overbought, Trendlyne data showed. MACD is above its center and signal line, this is a bullish indicator.

For example, if you find a cup and handle on 15-minute time frame, it makes sense to go higher to the daily time frame and check which way the stock has been moving. A cup and handle are considered a bullish signal extending toward an uptrend, and is used to spot opportunities to go long. This is an example of Cup and Handle as a continuation pattern in Nifty news which was formed in a span of about 2 years.

The selling volumes are low and don’t push the stock price down. The buying also continues, and if large volumes of buying hold, the stock breaks the resistance level, and upward trends emerge, making a handle pattern. Similarly, the cup with handle pattern also has certain limitations. The main disadvantage is the time taken to form a clear pattern.

A rounding bottom marks a struggle between buying demand and selling pressure that is almost equal. In the first part of the formation, the sellers overpower the buyers… Now, during the formation of the handle, most of the sellers sell their stocks. So, at this point, the shares are held by people who have a strong conviction in the stock. As there are minimum to no sellers, buyers can easily push the prices up.

Some of the bullish chart patterns are Head and Shoulder, Double Bottom, Cup and Handle, Flag pattern, Falling channel, Ascending triangle, among others. Of these, Cup and Handle pattern is one of the commonly used technical indicators by the trading community. The other major school of investing – technical analysis – involves predicting the price movement of a security by analysing the historical patterns of asset prices. This philosophy of investing believes that history repeats and one can make gains in the stock markets by spotting patterns that often follow the same trajectory.

A trader should make sure that it is a few months old but no more than that. If the cup and handle formation is too mature, it might mean that the consolidation phase is on the weaker side and hence hurt potential gains. The period of consolidation is the U-shaped cup whereas the breakout is signified by the handle. No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment.

As the stocks that make up this pattern test old highs, it is likely to come under pressure from investors who have previously bought at this level. It is likely to consolidate into a downtrend for 4 days to 4 weeks before the price rises due to selling pressure. The cup and handle are considered a bullish continuation pattern and are used to identify buying opportunities. The “Cup and Handle” is a bullish continuation pattern, which was developed by William O’Neil, to identify strong upside in the stock. The pattern resembles a cup and handle where the cup is in the shape of a “U” and the handle has a slight downward drift.

A stop-loss is used to control the risk of a trade by selling a position when the price drops enough to negate the pattern. Place the stop-loss below the lowest point of the handle. A cup and handle pattern is an easy and highly popular pattern used by traders in the market.

At these low price levels, buying comes in, and with buying pressure, the cup curvature starts moving up to reach the resistance line. At this stage, an entire curved bowl-shaped cup is seen. The trend is confirmed as cup and handle formation only when the stock price surpasses the resistance level and shows an upward movement. Only then can a trader get a confirmation that the higher price stock movement is going to sustain.

Experienced cup chart patternrs with a higher risk appetite place stop loss at the bottom of the cup as well for higher gains. It occurs when a downward price wave is followed by a period of stabilisation. After then, prices rise to about equalise the previous fall. It forms a U-shape, or “cup,” in the “cup and handle.” Within a channel, the price then travels sideways or downward, forming the handle. This pattern resembles a cup and handle shape, where the cup is “u” shaped and the handle has a slight downward drift. The cup and handle pattern can be formed in a period of seven weeks which is considered short or it can extend as long as 65 weeks.

Performance of the pattern is superior on shorter handle size . A “V” shaped bottom is absolutely no-no, while attempting to trade “cup and handle” pattern. Cup and handle pattern is a unique charting pattern, which resembles morning tea-cup along with nice handle.