TRBLong
TRB/USD
The "cup and handle" is a technical analysis pattern used in the stock market and other trading markets. It is a bullish continuation pattern that marks a consolidation period followed by a breakout. The pattern resembles the shape of a tea cup, with the cup being a rounded bottom and the handle being a smaller consolidation to the side.
Key Characteristics of the Cup and Handle Pattern
Cup Formation:
Shape: The cup is typically U-shaped and resembles a rounding bottom. It indicates a period where the stock or asset was in a downtrend, followed by a gradual recovery back to the previous high.
Duration: The cup can form over a period of 1 to 6 months. The longer the cup, the more significant the pattern.
Handle Formation:
Shape: After the cup is formed, the handle appears as a short-term consolidation or slight pullback. It often takes the shape of a small descending channel or flag.
Duration: The handle usually lasts from one week to a few weeks.
Breakout:
Trigger: The pattern is confirmed when the price breaks above the resistance level defined by the peak of the cup.
Volume: Ideally, the breakout is accompanied by a surge in volume, indicating strong buying interest.
How to Trade the Cup and Handle Pattern
Identify the Pattern:
Look for the characteristic U-shape followed by a smaller consolidation period.
Ensure that the handle is forming near the previous high of the cup.
Set Entry Point:
Enter the trade when the price breaks above the resistance level (the peak of the cup) on increased volume.
Set Stop-Loss:
Place a stop-loss order below the lowest point of the handle to manage risk.
Set Target Price:
Measure the distance from the bottom of the cup to the breakout point and project that distance upwards from the breakout point to set a target price.
Disclaimer
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