Hi,
some words about Cup and Handle : a chart pattern with a high accuracy...
Definition :
A pattern on bar charts resembling a cup with a handle. The cup is in the shape of a "U" and the handle has a slight downward drift. The right-hand side of the pattern has low trading volume. It can be as short as seven weeks and as long as 65 weeks.
As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for four days to four weeks... then it takes off. Below is an example of a cup and handle chart pattern:
A couple points on trying to detect cup and handles: Length - Generally, cups with longer and more "U" shaped bottoms, the stronger the signal. Avoid cups with a sharp "V" bottoms. Depth - Ideally, the cup should not be too deep. Also, avoid handles which are too deep since the handles should form in the top half of the cup pattern. Volume - Volume should dry up on the decline and remain lower than average in the base of the bowl. It should then increase when the stock finally starts to make its move back up to test the old high. Retest (of old high) - doesn't have touch or come within a few ticks of old high. However, the further the top of the handle is away from the highs, the more significant the breakout needs to be.
Have a look on ADTR...
We have a cup and Handle....You can buy now at he support at about 0.24 or wait and see for a breakout at about 0.32-0.33
Good trade ! ;D
Quote from: sebfr on December 12, 2005, 06:05:59 AM
Hi,
some words about Cup and Handle : a chart pattern with a high accuracy...
Definition :
A pattern on bar charts resembling a cup with a handle. The cup is in the shape of a "U" and the handle has a slight downward drift. The right-hand side of the pattern has low trading volume. It can be as short as seven weeks and as long as 65 weeks.
As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for four days to four weeks... then it takes off. Below is an example of a cup and handle chart pattern:
A couple points on trying to detect cup and handles: Length - Generally, cups with longer and more "U" shaped bottoms, the stronger the signal. Avoid cups with a sharp "V" bottoms. Depth - Ideally, the cup should not be too deep. Also, avoid handles which are too deep since the handles should form in the top half of the cup pattern. Volume - Volume should dry up on the decline and remain lower than average in the base of the bowl. It should then increase when the stock finally starts to make its move back up to test the old high. Retest (of old high) - doesn't have touch or come within a few ticks of old high. However, the further the top of the handle is away from the highs, the more significant the breakout needs to be.
Sebfr,
Nice explanation. It made me realize I've been looking at an alert for this for sometime in my scanning tool but only now realize its for cups and handles - they just call it something else: false gap retracement. Here's a manually refreshable list that's real-time during the market:
http://www.trade-ideas.com/SingleAlertType/FGUR/False_gap_up_retracement.html
Here's their definition: http://www.trade-ideas.com/Help.html#FGUR
thanks again
MVCO is a great example of a Cup and Handle breakout in progress. The measurement of this breakout is 17.50 or so. With the fundamentals pointing much higher than that (reported blowout earnings of .60 EPS last quarter), 17.50 should be easily achievable. After the initial breakout over 12.35, the stock got extended at 14.80 and has pulled back to the lower 13's.
i'm getting thirsty
I posted this one on another thread, but I thought I would put it in the cup & handle thread too - OMNI looks like it is basing in the handle of a sizable cup, and ready to break - any thoughts??
Any other cup n handles out there right now??
I'm not sure that's a valid Cup and handle with the volatility on the upside. If it is though the handle appears to have broken down already into a neutral pattern. :(
A good example with UGNE in 2005...
:)
Great Scottishtrader..I applaud you...
OMNI made more 100% in few months !!!! :)
Thanks sebfr, I just wish I had played it now!!! Hindsight is always 20/20 eh?
Still nice to see a classic pattern breakout come to fruition - just gotta find some more!
I found an another...BRVOE ! Great :o
It is not time to play this pattern but we must be patient...
excuse me but i don' t have understand your question "Hindsight is always 20/20 eh?".. :(
can't you post them just after the handle is done!:)
Give examples permit us to educate ourself...Be your own master.
If i find some others i will post here...I have give an example "in life" with SRVY..But for me it not the "perfect" moment to trade this pattern.
You have another one...SSRI :
Watch GST for the handle to break to the upside...
Hi joet,
Great find with this stock...I applaud you... :) But for me it is not a "cup and handle" for two reasons :
1. "Cup and handle" is essentially a continuation pattern...And as you see on GST chart, GST is on a Downtrend. ok sometimes "Cup and handle" is a reversal pattern. So why not ? So see the second parameter :
2. The "left cup" is less than the "right cup"...
This topic is good http://www.3stocksonfire.org/trading/index.php?topic=5933.0
But it is a good reversal chart :
1. Volume on base (>= 2 months -> valid) are high.
2. Divergence between price and indicators can be found : Price made new low and Indicators not.
3. Gap of breakout with high volume
4. Two trendline breakout
5. Candelstick : Three rising methods appeared ?
Two strategy :
1. Aggressive : Buy now at 2.85 with a stop loss near support at 2.75-2.60
2. Conservative : waiting for the signal of a threerising methods...Withe marabozu with high volume and price close above last with marabozu...
Theoric target :
1. 3.8
2. Use fibonacci retracement with support/resistance : a. conservative ->3.48 b. Aggressive -> 3.90
Stop loss :
Pattern is invalided if gap is filled...
What do you think of this analysis ?
Thanx SEBFR
I appreciate your work. Some new jargon in there for me to chew on ;)
we must credit Terliso for the find, as i bought after reading that post in stock picking.
He is currently waiting to enter to see if the gap at 2.50 gets filled, i will be stopped out if it does, unless very light volume.
I still see a Cup formed between June 12 and aug 28, currently forming the handle... When you talk about cup one and 2 are you refering to sides of the cup or small cups in themselves?
I like the consolidation (coiling?) we see here... if volume comes in i hope to see a run up... But Melf has me worried Look at his ASTM example, that chart was similar to GST back in Jan-march 06 and after it coiled it fell flat on its face :-[
Lets see were GST goes next week Cheers joe
Thanks joet and Thanks to Terliso.. ;) Terliso has ea godd strategy..Waiting for a correction near 2.50 level..I just hope that GST don't go to touch the sky before ! :)
When I talk about cup one and 2 i am refering to sides of the cup. For having a "Cup" you need before an uptrend. And before June 12 we don't have an uptrend. So for me we can't say we have a cup.
ASTM don't have a base before the power spike at the end of march...Market has tested the "gap of breakout".Cf. Chart
We will see ;) Unfortunately it is difficult to predict next trend of market :'(. But if it was possible everybody will take the same decisions and it will be very sad. Market is a challenge. It learn a lot on our own psychology. We can just try to be better than chance and make trades with a good Reward/Risk ratio.
See you soon. Sebfr.
Hi,
I am dissapointed..I don't have see a wonderful "Cup and handle" on BTJ...Sniff :'(
Hi,
A good Opportunity on GIGM...Cf. Thread at "stock picking" :)
Howdie SEBFR
are you seeing the cup/handle form on the bollinger band? The fromation sure is not very clear in your box. Are you buying GIGM at the 10.30 level, volume is intriguing and trend is strong... tempting. Help me see the formation you speak of!
Cheers Joe
Hi joet,
You know perfect "Cup and handle" is rarely...That is why be a trader can be compare like an artist..At each to see and find new chart pattern...
In the theory, Bollinger bands are not essential in the pattern. But you can use them, why not ?
The buying level ? It depends on your style of trading...There is not one way to play a pattern.. You can buy before the end of the pattern (more risky), you can buy after the trendline breakout, you can bu on a pullback after the pullback...At each to decide. Be your own master.
Trend is strong ok, but we can see a long red day after the breakout...It could be a false signal and finally, a double top could be appear..That is why it is most important to analyse your possible loss than your gains.
Look at HPOL... ;) Very perfect...Rare..Better than GIGM because we are just in the third eliott wave..False start are reduce.
Look at DECK... :) Almost terminate...
Have a look on MEH...A false start ! :-[ But actually, pattern is not invalided...When we see MEH we remark 3 eliott wave..
Perhaps MEH will continue to go up perhaps not but it is important to notice that this pattern works better after the first strong uptrend..
ISIG :)
Hi,
Have a look on JPM...
ANEN ? ???
FMD...
Thanx for the posts Sebfr! Why the frustration on ANEN, did you miss the trade?
Did you short GLW today. I appreciate the strategies in your posts. I bought some ISIG on the retest of the 3.50 break out (dropped to 3.55) will see if it holds up!
Melf spoke of the nuances of chart reading today and your posts are a fantastic example. See if i am reading your thought correctly here... you are short on GLW because you see the recent rally more of a bear flag (correct name?) than a cup handle break up because it has a more established down trend, longer durationthan FMD which your are bullish on the recent break out up!?? (I see a possible short term short on FMD, especially if it gets 2 more days of green to send the rsi to 85 or so, it will need to correct some and it hass been volitle...
Still waching HPOL? tommorrow looks like a possible entry if it can break 6.26!!! G pattern and a nice handle on the cup.. trend is up, volme is good and support at 6 held nicely... I will be watching. Melf should like this one...
Cheers Joe
Hi Joet and Thanks...
I was frustated because i am not Bullish...But since signal appeared, ANEN go down...Gap is filled -> bad news for "bulls" but GREAT news for "BEARS". My main problem about trading is sometimes (more before :)) i am not enough patient..This time, i am right.
YES i have shorted GLW at 23.50...With a stop-loss at 25.00 You know in this moment i am BEARISH. If i posted some bullish post it is because many traders want to buy stocks. I just hope to select good candidates for this strategy. I am open at any strategy and i like trading. I have my own strategy but i am open at others strategy.
I don't see any "Cup and handle" on GLW..I am sorry. Can you show me ?...Otherwise, you are right when you say "because it has a more established down trend, longer durationt". I play a swing tranding startegy called "Buy/Sell on pullback"..
We will see on ISIG but be careful, don't forget to put a stop-loss... ;) ISIG is very volatile. Large gains is possible but large loss too. Do you have any money management plan ?
HPOL made a minor pullback. Volume is good. waiting for some days and see if it was a false start.
Good trades.
Cheers Seb
FCSE :)
A great former Cup and handle...T :
DHCC long term uptrend looks like a cup n handle breakout today,looks like there's room up to 3.20 before resistance
Great find traderjbr...I applaud you.. :)
Have a look on BID
Nice thread here about Cup-N-Handle,it's one of the more difficult patterns for traders to interpret.I read a trading book written by a well known trader who totally missed the definition of the Cup-N-Handle.In that book the author refers to the C-N-H as a reversal pattern,when its a continuation pattern,also they show a chart with a rounded bottom that looks like a Cup-N-Handle but it followed a downtrend.I meant to write this author but I never got around to it.I used to make this same mistake until I read over and over everything in IBD's book and their website about the pattern.Stockcharts site makes it real clear as well,so when I think I spot this pattern the first thing I do is go to the 1yr chart and see the big picture,then you can count how many bases may have preceeded the pattern to see if its late or early in the trend.Once we are confident theres a uptrend in place leading to this formation,then we can break it down further comparing the left side vs right side,its handle,duration and so forth.So the most important rule to remember is: UPTREND before the start of the Cup.Sebfr you deserve the "applaud" for starting and sharing the true way to spot a C-n-H,you've shown many good examples here!Another good site that builds on IBD's teachings and has a list of Cup's and other patterns is Breakoutwatch.com,they have a nice learning center area thats pretty good for anyone wishing to brush up.Enough rambling,BID chart looks strong I see it as C-n-H ,which measures to around 39ish+-,just wish the period between June-July could of been a little more smoothly rounded but it still looks valid to me,thanks for the tip.
Thank you...You are right, BID could of been a little more smoothly rounded..The problem is in reality, rare are "perfect" pattern as like they are in books...I am not a dogmatic person..The most important in a pattern definition : it must to please to you. If you don't have good feelings with it, follow another. That is why Technical analysis is also an "art". My philosophy about this site : take what you good with.
Thank you for the reference of the site : Breakoutwatch. I don't know it. Serious site are a good help. At each to decide the value of each analysis.
See you soon
Howdie Sebfr
Not sure if this is the best place to post a ? but i wanted you and others to see it.
You seem to play stocks of all volumes. Do you find that your TA works as well on the less liquid stocks as the big volume plays? I see that some traders only play the big volume stocks and i am assuming that is because they are trading a large number of shares amd want to be able to exit quickly!?!
However if we are playing a smaller number of shers say 100-500 of a particular stock then it seems that extiting would still be possible relatively quickly.
Also do you ever look at enterprise value vs Market cap?
Take a look at FRN: http://finance.yahoo.com/q/ks?s=FRN
It has been channeling between $8 and $11 and could be ripe for a short, but with such a high enterprise value the short appears too risky... also see the 2yr chart... THoughts?
Thank you for your posts!
Cheers Joe
Thank you joet...And thank you for the link...
Does volume is important ? Of course ! I like liquid stock fro three reasons :
1. less easy to manipulate them
2. Low spread between ask and bid
3. Entry quickly and exit quickly = it depends of course of the number of shares
But, each trader is unique and i have my own criteria. Moreover, i put posts that it doesn't go with my strategies but it could serve others...There are so great tactics...Find good strategy is enough easy but follow strategies and trade with a good money management is more difficult.
Personnally, now, i d'ont trade penny stock and stocks with an average volume less of 10000. Even if my capital is > 100000$ my strict money management rules permit me to have few shares at each time so i just forget extreme situation.
Can we predict cup and handle ??? I don't know...But i am going to play at this game with MTEX...
It seems that MTEX is forming the handle..Trendline as resistance and volume is more low near resistance.
Strategy :
1. Sell now at 17.87. profit target at 15 - 15.5.
2. buy at 15.5. (50% retracement)
hi Seb,
could you say me if I'm ok with my analyse...
Thanks,
Id...
(http://C:%5CDocuments%20and%20Settings%5COlivier%5CMes%20documents%5CMes%20images%5CINSM%20chart%20!.JPG)
Hi Idfix :)...Thank you for ask me my help on this chart...
Sorry but i don't see a "cup and handle" pattern oh this chart...Why ?
1. We are not a major Uptrend. We can just see for the moment a pullback after the big downtrend.
2. There is no left side of the cup ! Most important...The left side of the cup MUST BE an uptrend. Or there is a downtrend on the chart..
Wait for a triangle breakout..
Good trade and nice day !
Hi Seb...
Thanx for your analyse...
There's a symetrical triangle on the other side... perhpas good also !
I'm watching better now,
Id...
Howdie Sebrf
I believe this has been posted but i will re-post because it is helpful: http://stockcharts.com/education/ChartAnalysis/cupHandle.html
If you have time could you look at GNBT, I believe the cup was May 11 to oct 10 of this year and the handle the past 4 sessions. This handle is probably too short but watch for the break over 2.44
I believe that it is important for the formation for the handle to slope down. (not in MTEX but maybe another formation, rounding bottom??)
You may say that GNBT is not in an up trend, so not a C+H but in looking at the 2 year chart we are in an up trend and take out the big spike from Feb to June the trend is good and we are now over Terliso's 3 magics :)
Curious to hear your thoughts. Thanx for the reply on GS, just playing for a pull-back.
BITS is also forming a Beautiful Cup handle enter if it breaks 10.37 !?!?!?!? 6 month cup! 3 week handle...
do earnings play into your trades, some never hold through them, some like them? Curious I have had them go both ways so no personal rule yet
Great weekend to ya Cheers Joe
Hi joet,
and i applaud you for your last post on this topic.. :)
Indeed, when we are looking at the 2 year chart of GNBT it could be a "Cup and handle" or a "rounding bottom"... ;)We have a filled black candle the last week...Perhaps a retracement near 1.90 could appear. In this chart i see a symetrical triangle breakout -> good sign for bullish strategy..Wait for a pullback near the breakout...It is a possible good entry. Or wait for the trendline breakout...
I like "Stockcharts.com" but in the example they showed at the link you post i don't see any uptrend before the cup...Perhaps my view is too short. I prefer to see an ascending triangle.
on GS we have a "rounding bottom" pattern.
GITS -> great find :D But for me "cup and handle" was formed on september (red circle) as you can see on chart ;) But it seems to be a good stock to buy. Trendline (red) as support and good volume. GITS is ready for a a new wave of highs. Trendline as a stop-loss zone.
There are many ways to find winning strategy in stock market. You can use Fundamental analysis (play pre-announcements earnings or insider moves or...) or technical analysis or mix two analysis...Personnaly, i use technical analysis not because it is a unique way to be a winner trader but because this analysis correspond to my personnality. Sometimes, specially in short-term strategy, i have a look on earning meetings. But i am curious and i like to be a trader. So i post several strategies for help people.
Great weekend to you
By
Thanx for looking Seb,
I believe some typos that i am trying to clarify :) Do you see a rounding bottom on GNBT... the Chart on GS perhaps the 150's was a bottom?
I am bullish on GNBT, good news and I like the chart, if we do get a dip to the 1.90's i may add some.. where do you pick the left rim of the cups? this seems key in seeing the pattern and creating a target.
GNBT weekly chart sure looks more like rounding bottom as there is no handle, target for rounding bottom?? Do you put more trust into daily or weekly charts? Is it particularly strong pattern if you see it on both? Time frame for patterns for you?
On BITS would you enter now or wait for a pull-back... I am even thinking about buying if it breaks new high at 10.37 and immidiately put a stop at 10... thoughts?
The trendline you drew on BITS seems very steep? (short term) why did you choose to draw it there (if you have time :) I understandif you do not have time to answer questions, just know that thinking about the patterns as i formulate the questions helps me learn.
Cheers Joe
Hi joet ! ;)
I have some time to answer to you..
About BITS :
Trendlines are here for help you. Sometimes they work well and sometimes not. You can see a channel on BITS. It is more releviant. ;)
Don't wait for a pullback. Pullback is already arrived ! Look at the chart (red lines).
I believe it can be a good time to buy this stock. Look at volume. Or you can wait for new highs.
Two possible stop-loss : Along trendlines of channel (Blue line) or at the low of the pullback near 8.25 zone.
About GNBT :
Indeed Chart seems good :)...Hard to say : rounded bottom or "cup and handle" ?..I am sorry but i don't know where the profit target could be in theory for such a pattern. Use support-resistance or trendine or indicators to give you good targets. 2.75 is a valid resistance and 1.85 a valid support.
I use Daily chart
Yes on GS you have a rounding bottom around 150
Good day
This is an unusuall chart :o I love the cup with a handle( so reliable ) but i rarely see the cup extend past the old high. Maybe its forming the handle now, but like I said its unusuall. Usually after the week hands are shaken out IE bottom of handle , the stock will go up above the old high a ummmm shoot i forget the percentage . Melf will know hes like a tech wiz guy . Great find though. :-* :-*
A cup and handle is formed on BITS...