Cup and Handle
Moderate ConsensusA bullish continuation pattern that looks like a teacup in profile: a rounded "cup" retracement back to the prior high, followed by a shallow "handle" pullback, then a breakout above the cup's rim.
Candlestick chart showing an uptrend into a rounded cup-shaped pullback and recovery back to the prior high, followed by a smaller handle pullback near the highs, then a breakout above the cup rim.
Sample data — illustrative only, generated to demonstrate this pattern's shape. Not a real security.
Identification Criteria
- Forms after an existing uptrend — the cup is a temporary, rounded pause within that trend, not a reversal.
- The cup itself resembles a rounding bottom: a gradual decline, a rounded base, and a gradual recovery back toward the level where the decline began.
- The handle is a smaller, shorter pullback near the highs, often drifting sideways to slightly down, typically retracing less than a third of the cup's advance.
- Volume classically contracts during the handle before expanding again on the breakout.
Formation Logic
The cup represents a healthy pause and consolidation of an existing uptrend, with rounded price action reflecting a gradual return of buying interest. The handle represents a final, lower-conviction round of profit-taking near the old high before the trend resumes — a "shakeout" of weaker holders just before the advance continues.
Breakout / Confirmation Rule
Confirmation requires a decisive close above the resistance formed by the cup's rim (the high at both the left lip of the cup and during the handle), ideally with an increase in volume. A handle that retraces too deeply (well beyond a third of the cup's advance) is a warning sign that weakens the pattern.
Measured-Move Price Target
A commonly used, purely illustrative technique: measure the depth of the cup from its rim to its lowest point, then project that distance above the breakout point. Given the pattern's multi-stage structure, treat this as a rough reference rather than a precise forecast.
Common Pitfalls
- A handle that drops too far below the rim resembles a fresh downtrend rather than a shallow pullback, and increases the odds of failure.
- Cups that are too narrow (V-shaped rather than rounded) behave more like sharp reversals and lose the gradual-accumulation logic the pattern relies on.
- Breakouts on weak volume are more prone to stalling back into the handle range.