Technical Analysis (Charting)

Section: 6 Popular Charting Patterns

Sub Section: 6 Cup and Handle

This is a pattern on a bar chart that can be as short as 7 weeks and as long as 65 weeks. The cup is in the shape of a U. The handle has a slight downward drift. The right hand side of the pattern has low trading volume. As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for 4 days to 4 weeks, and then it takes off. It looks like a pot with handle. Investors have made a lot of money using this pattern, which is one of the easier to detect. An example is illustrated graphically as follows:

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