Continuing patterns 3 : Cup with handle

As its name implies, there are two parts to the pattern: The cup and the handle. A cup-and-handle pattern resembles the shape of a tea cup on a chart. This is a bullish continuation pattern where the upward trend has paused, and traded down, but will continue in an upward direction upon the completion of the pattern. The ‘cup’ is a bowl-shaped consolidation and the ‘handle’ is a short pullback followed by a breakout. There should be a substantial increase in volume on the breakout above the handle’s resistance. The stronger the volume on the upward breakout, the clearer the sign that the upward trend will continue. The Shape of the cup itself is also important: it should be a nicely rounded formation, similar to a semi-circle.

Example of a Cup with handle:

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  1. Continuing patterns 2 : Triangles
  2. Continuing patterns 1 : Flag & Pennant
  3. Importance of Volume in Technical Analysis

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