![]() A Retest of previous resistance is not required to touch or come within several ticks of the old high however, the further the top of the handle is away from the highs, the more significant the breakout needs to be. Volume - Volume should decrease as prices decline and remain lower than average in the base of the bowl it should then increase when the stock begins to make its move higher, back up to test the previous high. Avoid handles which are overly deep also, as handles should form in the top half of the cup pattern. ![]() Depth - Ideally, the cup should not be overly deep. So, a Wedge pattern could be viewed in a couple of shapes as a rising and as a falling one. It is worth considering the following when detecting cup and handle patterns: Length - Generally, cups with longer and more "U" shaped bottoms provide a stronger signal. A cup and handle is considered a bullish continuation pattern and is used to identify buying opportunities. As a stock forming this pattern tests old highs, it is likely to incur selling pressure from investors who previously bought at those levels selling pressure is likely to make price consolidate with a tendency toward a downtrend trend for a period of four days to four weeks, before advancing higher. A subsequent breakout from the handle's trading range signals a continuation of the prior advance. As the cup is completed, a trading range develops on the right-hand side and the handle is formed. ![]() The cup forms after an advance and looks like a bowl or rounding bottom. As its name implies, there are two parts to the pattern: the cup and the handle. It was developed by William O'Neil and introduced in his 1988 book, How to Make Money in Stocks. This pattern is a bullish continuation pattern that marks a consolidation period followed by a breakout.
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