A bullish continuation pattern shaped like a teacup — a rounded bottom followed by a small pullback before a breakout.
A cup and handle forms over weeks or months. First, price drops, rounds out at a low, and rallies back to the original high — that's the cup. Then there's a small, shallow pullback near the highs — that's the handle. When price breaks above the high after the handle, the pattern completes and a strong uptrend usually follows.
The pattern works because it represents accumulation followed by a final shake-out. The cup is where buyers slowly build positions through the bottom. The handle is where weak hands get flushed before the real breakout. The break above the rim is when institutional buyers commit and price runs.
Measured target: the depth of the cup projected up from the breakout. A 200-pip cup means a 200-pip target above the rim.
Gold printed a textbook daily cup and handle from late 2022 to mid-2023, with the cup forming between $1,615 and $2,070 and the handle pulling back to $1,940 before breaking out and rallying to $2,400 in early 2024.
Frequently asked about cup and handle
What is a cup and handle in trading?+
A bullish continuation pattern shaped like a teacup — a rounded bottom followed by a small pullback before a breakout.
When will I see cup and handle used in real trading?+
Most often on stocks and indices, but also visible on long-term forex charts. It's a slow pattern — usually plays out over weeks or months on the daily timeframe.
What is the most common mistake traders make with cup and handle?+
Trading cups without handles. The handle is the shake-out that makes the breakout reliable. Without it, the breakout often fails because no weak longs got cleared.
What do experienced traders know about cup and handle that beginners don't?+
The handle should be small relative to the cup — usually no more than a 38% retrace of the right side of the cup. Deeper handles mean weaker structure and more likely failure.
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