Cup and handle pattern is a bullish pattern, that marks the consolidation phase, followed by breakthrough.
Components of cup and handle pattern
The current trend: ideally is presented a few months trend, which is not yet fully developed. The more the trend is developed, the lower is probability that the cup and handle pattern points to a continuation or there is less earning potential.
The cup: The cup has a perfect “U” shape and an equally high top on both sides. If the cup os more in “V” shape, there is less probability that the sample shows a continuing trend.
The handle: After the creation of top on the far right end of the cup, appears a short term negative turnover, called the handle. The smaller is handle, the greater is probability of continuing bullish trend.
Duration: The cup can cover a period between one and six moths, the handle covers a period between one and four weeks.
Turnover: Increased turnover at the breakthrough confirms the continuation of the bullish trend.
How to take advantage of the cup and handle pattern?
In the case of perception of cup and handle pattern, decide to buy when it comes ti breakthrough on the top of the cup and when high traffic confirms the breakthrough. We exit from the position, when we reach a satisfactory return or when there is a possibility of creating another pattern hat suggests a negavitev trend turnover.