You ask: “What is a Cup and Handle Pattern?”
The cup and handle is both a continuation and a reversal pattern.
- Occurs during an uptrend; a cup and handle forms, then the price continues its rise.
- Marks the end of a downtrend, and shows the price transitioning into an uptrend.
Key pattern characteristics
Trend: Prior trend before the formation of a cup and handle pattern must be bullish.
Cup shape: The cup formation should be “U- shaped” and not “V-shaped” and is usually a decrease of 20% to 40% from the left-corner’s peak to the bottom of the cup. In cryptocurrency this decrease can be much larger (possibly up to a 70% decrease).
Cup depth: Cup should retrace at least 25% of cup depth but may not be more than 50% of cup depth.
Handle: Handle resembles a flag formation in a pullback fashion. Breadth (width) of a handle is usually small, and it can be 25% to 40% of a cup’s width.
Volume: Volume diminishes during the first half of the cup and increases during the right side rise of the cup. The handle also exhibits a similar volume behavior. Volume should see a significant surge during breakout above the rim level.
Duration: Cup and handle patterns must have extended breadth (two to 12 weeks) to be a valid pattern *this may not apply to cryptocurrency (see “Cup & Handle,” below).
The cup and handle is similar to a Rounding Bottom except that with the cup and handle the price stalls near the breakout point and moves sideways or lower for a period of time. The U-shaped price action forms the cup, and the sideways or downside movement that follows creates the handle (see below).
Question for advanced traders:
Is this XLM chart showing a Cup & Handle pattern? (Answer below)
- Yes, it is a Cup & Handle
- No, it is a Roundbottom
- I’m new and clueless
- Your Mom
Why or why not?
To me, it looks very similar to this (Icon) chart:
- This is a Cup & Handle
- This is not a Cup & Handle
- BCash is the Real Bitcoin
- Roger Ver is Gay
Of course, I think the ICX chart is prettier.
Plus, I’m extremely biased as I am holding lots o’ that 'ish.