Cup and Handle

A bullish technical chart pattern resembling a teacup that signals a breakout continuation.

What Is the Cup and Handle Pattern?

The cup and handle is a bullish technical pattern that looks like a teacup on a stock chart. It was popularized by William O'Neil, founder of Investor's Business Daily, and is considered one of the most reliable bullish patterns in technical analysis.

How It Forms

1. The Cup: The stock declines, forms a rounded bottom over weeks or months, and then rises back to the level where it started falling. This creates the "U" shape of the cup.
2. The Handle: The stock pulls back slightly from the cup's rim in a tight, downward-drifting consolidation. This forms the handle.
3. The Breakout: The stock breaks above the handle's resistance on strong volume, confirming the pattern and triggering a move higher.

Trading the Pattern

The buy point is at the top of the handle, where the stock breaks to new highs. The stop-loss is placed just below the handle's low. The price target is typically measured by adding the depth of the cup to the breakout point.