A rounded basing pattern (cup) followed by a small consolidation near resistance (handle) creates one of the most reliable long continuation patterns, especially in growth stocks coming out of corrections.
Indicators Used
Swing High/LowVolumeSMA 50
Rules
📈 Cup & Handle Long
- Prior uptrend established (stock in overall uptrend on weekly)
- Cup forms: smooth U-shape correction, 5-25% deep, over 7-65 weeks
- Cup bottom rounded (not a sharp V)
- Handle forms near cup's rim: shallow pullback, 3-20%, 1-4 weeks
- Handle must stay in upper ⅓ of cup's depth
- Enter long on breakout above cup's rim (resistance line) on volume surge (>50% above avg)
- Stop: below handle's low
- Target: depth of cup added to breakout price
⚙️ Configuration
- // Cup & Handle Config
- Cup depth: 5-25% (ideal: 12-18%)
- Cup duration: 7-65 weeks
- Handle depth: max 20% (ideal: <15%)
- Handle position: upper 1/3 of cup
- Volume on breakout: >50% above 50-day avg
7-65 wks
Cup Duration
<20%
Handle Depth
Cup Depth
Target Add
💡 Pro Tip
William O'Neil's rule: the handle must form in the upper third of the cup. A deep handle (mid or lower cup) suggests weakness and often leads to failed breakouts. The prettier and more symmetric the cup, the higher the probability.