All language subtitles for 7. Cup With Handle Chart Pattern

A very interesting chart pattern is what's called a cup with a handle, it actually looks like a cup

with a handle on its side is the idea.

And what makes it interesting is it's not only a pattern by nature, but it's combining these price

patterns like you'd have in a chart pattern and trends and all that with things really you have to have

certain other factors are indicators that are part of that volume levels, how much trading is buying

and selling is going on as that cup forms, as we'll see here in a moment.

And you're going to use it in the moving average indicators as well to to help kind of confirm all of

this as well.

So they all kind of work together and we'll walk through how this works, including the moving average

a little bit so you can see how this all pulls together.

And it is a continuation pattern.

So the idea of the trend and the idea of a cup and handle is the trend.

Let's say it's going upward cup and handle form.

The trend will continue, is the idea.

So it's a continuation pattern and takes time to develop.

So this is one that does take time to develop.

But when it does and if it does, it's a very, very strong indicator.

When it does, we'll walk through why that is from kind of the psychology of what's going on with investors

and traders that's forming this pattern.

And as I mentioned before, it it's fun because it looks like a cup, you know.

So if you can start visualizing a cup on its side, you know, not not that downward on a side with

your cup in your hand.

So then that's kind of cool, right?

Kind of is interesting thing.

So let's take a look at a strong indicator cup with Handal.

So if you look at this here, this chart pattern, let's start off.

Let's see if we can guess.

Let's do a little more guessing game.

So look at it and just start looking at it.

You're looking for a cup.

So in a cup, let's say you're looking at side, you have a cup that would hold a liquid.

Right?

So you're looking for an indentation in this chart pattern, these price lines.

So they're going on this upward trend.

Can you see the part where there's a depression where you could maybe put some water or some adult beverage,

if you like?

And is there a handle that might be on the looking at our screen, the right hand side of that cup,

because they're going from left to right as far as time, you know, so that's what the panel looks

like.

If I put a little bit of a highlight on there, you kind of see how it's starting to form like a tea

cup, right?

Starting to form a cup around there is is the idea.

So that's what you're looking for, is that cup with the handle.

But to get there, there's a lot of things that got to happen.

So let's put a whole bunch of stuff on the chart and let's walk through it.

So first off, let's start at the very far left.

We've got to have an upward trend, right?

And you can see here the general direction if we were to draw more specific trend lines.

But you can see that the slope is upward, the prices are getting higher, there's an upward trend.

And then and then you can see that the bottom of the trading volume is kind of like this medium trading

volume that you'd see looking over the history of the prices for your security, whatever trading volume

it is, some securities trade a lot all the time compared to others.

But you're looking at this particular securities, horizontal or vertical bars at the bottom.

And let's say this blue part represents that range of volume.

And it's it's kind of a medium volume.

Right.

So it's on a nice upward trend.

Nothing exciting happening, but it's a nice, good upward trend.

Maybe we bought in earlier and we're hanging in there.

That would be terrific, right?

Maybe so we're we're seeing this happen.

I've seen this trend.

And then it starts to reach a peak and starts to go downwards.

And then it goes down in the cup part and it starts to go sideways.

Right.

So it doesn't go on a full downtrend mode.

It just starts to go sideways.

The price is going to bounce up and down a little bit in more of a flat part forming, in fact, the

bottom of the cup.

And you'll see the trading volume is low on this.

So you can see how they're all working together here, that the trading volume is low.

And then as we go back up, you'll start to go back up and then a handle forms.

And that's when the handle forms.

And certainly when there's the continuation pattern of the upward trend, we're back to this rising

pattern, back to this upward trend.

But one key part of that is that the trading volume is higher.

Right?

So all of a sudden, a lot of people are trading it and they're driving the prices higher.

And then all along this you're looking at, you want to overlay on this is the simple moving average

or you could put it in a different type of moving average, like a weighted moving average.

Look at the section around moving averages and learn more about moving averages.

But basically, let's say a simple moving average was looking over, let's say, the last ten days or

ten periods, typically days and saying what's the average prices?

And really where that line comes in, there is the form, the bottom of the cup.

We don't want those to go either too far, but either we would rather they didn't break the simple moving

average at all.

But if they only just go a little bit below, just a little tich, we don't want to go way below the

simple moving average because then we don't have a cup, we have more of a downtrend or we have a more

of a V shaped cup, which is we don't want we want more of a U.

Shaped type cup like we see here.

So you're using that simple moving average to kind of help confirm and be a basis on that.

And you can see how it follows along with the trend lines above it as far as that simple moving average.

So what's happening here?

So this is what it is, and you can trade off that, right?

You could have either invest in the upward trend and then see the cup form and you're hoping the cup

forms.

You hang in there and then once you see the handle, you really hang in there because now you're going

to be on an upward trend or maybe you're not in the security at all.

And you see this cup forming and then you see the handle and you start seeing that sideways, move the

handle.

Then you're starting to trade in there because, you know, an uptrend is coming or you're hoping that

uptrend is coming and because it's a continuation pattern.

And so you're buying in at that point as well.

So you either had bought in earlier in holding through the cup and handle phase or you see the cup and

handle forming and now you're buying somewhere in that hand.

Or most likely you're buying actually probably better things.

You're buying a little bit slightly up in the cup or excuse me, a little bit slightly after the handle

because you're you want to have that uptrend definitely form.

But if you think about the psychology of what's happening here is that we have this nice uptrend and

it's been going up.

We're going to start back in the left.

You're looking at the volume and stuff.

A nice steady uptrend buyers are buying is just kind of the steady uptrend and then it's losing steam.

Right.

That's what happens is they lose steam and instead it's either it's either going to continue later,

but it starts to go reverse the other way.

And then so the prices go down when people are taking profits.

And maybe that's what's happening.

Prices are going down, but there's low trading volume.

It's I think there's a lot of excitement.

It's not like there's something bad that's happening.

The trading volumes high driving the prices way down.

It's just kind of like it's just kind of really getting low volume, kind of boring.

This kind of moving along moves along the bottom of that simple moving average.

The cup is, in fact, above the moving average line, but the cup is foreign for me.

But again, it's nothing exciting going on from volume.

Then the phone starts to pick up and people are like, oh, OK, well, maybe it's picking up again.

And then what happens is those who didn't sell towards the bottom of the cup might be selling now at

the top of the cup or along the handle.

Right.

They can't decide which way to go.

The buy sell, there's a little bit of movement, but now there's more trading volume coming in.

And so that's starting to move that handle a little bit.

Might actually ticking up a little bit just itself.

It doesn't have to be a fully horizontal handle, but it's going to be and it usually isn't in real

world.

But it's what's going to happen is you're going to have this high volume and you're going to have this

upward trend.

So that's kind of and then people are like, oh, this was just a temporary setback.

That cut part, maybe a pullback if I held on.

I'm just going to hold on and really now ride this upward trend.

And other people are like, all right, they have this temporary pullback handle form with decisiveness

that the handle definitely went into new uptrend.

And now I'm back in a bind because I know that uptrend is going to keep rising above there.

So that's kind of the psychology behind a cup and handle.

Also, one thing to consider, too, is the longer the shape of the cup, the more it's more predictable

than a V shaped cup.

So if you see that the that we have this long, you there from the example that we're showing here with

this cup, it looks like you, but it's really kind of flatter and longer than if it was a real sharp

V type of a cup.

Also, the cup shouldn't be overly deep.

The idea is you've had some indecision, you have some profit-taking, but shouldn't be driven way down

low.

It should certainly not be driven below the simple moving average line.

That's what helps us with our cup.

So it should not be overly deep.

If it was really a deep cup, then it might be or not isn't size.

We're taking profits.

They might be an actual real trend reversal and it's not really a cup and handle.

It's actually something different going on.

So look for you.

Shape's longer you shapes in the cups to be more confirming and then also look at the cup is not overly

deep on it and that they'll really help you.

Well so you probably saw there you saying, well that's a lot with the cup and handle.

It looks nice, but I've got to really wait for that pattern develop and that's true and you have to

let it develop.

But as you can see, they're strong indicators in multiple indicators on top of indicators, so that

that builds a great trading opportunity.

So you may not be something you're trading every day, but if it kind of jumps out at you, slap me

in the face like you may want to take notice of it because it's could be a great trading opportunity

and to ride a long term upward trend after after a pause there in the cup.