The above figure shows an example of an inverted cup with handle chart pattern (in red). Price makes a gentle rounding turn, forming the inverted cup. Following the cup is the handle, a flat region in this example that stretches from March and into April. Price jumps upward for several days and creates another inverted cup (in green) before starting a new trend downward.
Definition:
An Inverted Cup and Handle pattern is formed after a pullback from a swing low sells off strongly to the prior swing low and stalls due to underlying support. The security then stalls much like a bear flag with slight upward pressure before breaking down below support.
Background:
The power of an Inverted Cup and Handle lies in the fact that after hitting underlying support from the prior swing low, a very minor correction is put in. The stock then breaks down past support which can be a sign that overhead supply in the security may be increasing.
Inverted Cup and Handle patterns can be stronger when the next logical place of support on the chart after the breakdown is a considerable distance away.
Practical Use:
Technical analysts often use Inverted Cup and Handle patterns as selling opportunities because of their ability to "prove" the lack of buying pressure during the timeframe being assessed.
Inverted Cup with Handle Identification Guidelines
Price trend: Just over half the time, price trends upward leading to the pattern.
Rounded turn: Look for a smooth, rounded looking turn (an inverted cup), but allow exceptions.
Cup rims: The two cup rims should bottom near the same price.
Cup handle: To the right of the cup should be a handle.
Cup retrace: Handle must not rise above the cup top but should retrace 35% to 60% of the prior down move.
Confirmation: The pattern confirms as a valid one when price closes below the right cup lip.
The inverted cup with handle pattern is tied for the best performance with high and tight flags in a bear market. In a bull market, the performance is middling; the failure rate is a bit high, and the average decline is meager.
Definition:
An Inverted Cup and Handle pattern is formed after a pullback from a swing low sells off strongly to the prior swing low and stalls due to underlying support. The security then stalls much like a bear flag with slight upward pressure before breaking down below support.
Background:
The power of an Inverted Cup and Handle lies in the fact that after hitting underlying support from the prior swing low, a very minor correction is put in. The stock then breaks down past support which can be a sign that overhead supply in the security may be increasing.
Inverted Cup and Handle patterns can be stronger when the next logical place of support on the chart after the breakdown is a considerable distance away.
Practical Use:
Technical analysts often use Inverted Cup and Handle patterns as selling opportunities because of their ability to "prove" the lack of buying pressure during the timeframe being assessed.
Inverted Cup with Handle Identification Guidelines
Price trend: Just over half the time, price trends upward leading to the pattern.
Rounded turn: Look for a smooth, rounded looking turn (an inverted cup), but allow exceptions.
Cup rims: The two cup rims should bottom near the same price.
Cup handle: To the right of the cup should be a handle.
Cup retrace: Handle must not rise above the cup top but should retrace 35% to 60% of the prior down move.
Confirmation: The pattern confirms as a valid one when price closes below the right cup lip.
The inverted cup with handle pattern is tied for the best performance with high and tight flags in a bear market. In a bull market, the performance is middling; the failure rate is a bit high, and the average decline is meager.
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