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Trend

There must be a trend on the market to talk about a trend continuation pattern. Ideally, the current trend is not longer than a few months. The longer the trend, the smaller the chance the pattern is a continuation.

  • Role: Continuation
  • Expected trend: Bullish
  • Previous tren: Bullish
  • Reliability: Moderate
  • Pattern: Cup and Handle
Cup and Handle Example

Cup and Handle Example

Cup

The cup part has a U shape. A pattern with V shape cannot be a cup. The flatter the U, the stronger the support line. The pattern is perfect when the top and bottom parts have similar size.

Handle

Handle is formed due to the pullback after the cup shape. The handle can be a downward flag / pennant, or a short pullback. Handle is a short consolidation period after the cup. It happens in the height similar to the cup’s depth.

Duration

The cup pattern is formed from 1 to 6 months. The handle is formed usually from 1 to 4 weeks.

Volume

The formation is characterised by unique volume. At the bottom of the cup, the volume is low. At the edges of the cup, the volume is high. During the handle, the volume is again low.

Target price

The price target is when the difference between the neckline and the bottom of the cup is set on the breakout point vertically.