The Cup & Handle Pattern
The Cup & Handle
is the corrective action after a powerful stock advance.
Generally a stock will have a powerful move of some
2 to 4 months, then go through a market correction. The
stock will sell off into the correction in a downward
fashion for maybe 20 to 35 percent off the old high
point. The time factor is generally anywhere from 8 to
12 weeks depending on the overall market condition.
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 drift in a sideways fashion with a bias to
the downside for about 4 days to 3 weeks.
handle is generally about 5% below the old high point.
A handle that is any lower is generally a defective
stock and contains higher risk for failure.
The time to
buy the stock, is as it emerges into new highs at the
top of the handle and not the old high point set some
8 to 12 weeks ago.
I have found some of
the biggest stock market winners have this very
powerful formation. It is one of the best and most reliable
formations to look for. However, it is important to
note that the best stocks with this formation are found
at the beginning of a market move after a good market correction,
and not during, or at the end of a major market advance.
HERE IS A SAMPLE CHART WITH A CUP AND HANDLE FORMATION