Strong Cup & Handle pattern on the weekly $IXIC chartToday witnessed a robust bullish surge in the Nasdaq with a cup and handle pattern (Very similar on the S&P500 too).
Introduced in 1988 by analyst William O’Neill, the cup and handle pattern signifies a bullish continuation pattern activated by consolidation following a robust upward trend. While the pattern requires time to evolve, its recognition and subsequent trading become relatively straightforward once it materializes. As with all chart patterns, trading volume and supplementary indicators should be employed to validate a breakout and the sustained bullish trajectory.
To validate the pattern, adherence to several rules is imperative:
- The cup with handle pattern must follow a significant bullish movement (Checked: +130% in 87 weeks).
- The lowest trough of the cup must be below 50% of the preceding bullish movement (Checked: -37%).
- The lowest trough of the handle must be below 50% of the cup’s height (checked: -13%).
Key statistics on cup with handle patterns, courtesy of CentralCharts, include:
In 79% of cases, the exit from a cup with handle pattern is bullish.
In 73% of cases, the cup with handle pattern’s price objective is reached (half the cup’s height), after breaking the neck line.
In 74% of cases, after exit, the price makes a pullback in support on the neck line.
In summary, the cup and handle pattern signifies a bullish continuation pattern, initiated by consolidation after a robust upward trend. While its development requires time, once formed, recognition and trading are relatively straightforward. Employing trading volume and additional indicators is crucial for confirming a breakout and sustaining the original bullish price movement.
PS: I think that a perfect cup and handle pattern would be form on the breakout of the 14300 neckline
