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Cup and Handle Chart Pattern

Cup and Handle Chart Pattern

The Cup and Handle pattern is one of the most reliable and widely followed chart patterns in technical analysis. As the name suggests, the pattern looks like a tea cup with a small handle on the right side. This formation typically signals a bullish continuation, meaning that the price is likely to move higher once the pattern is complete.

The “cup” part forms after a downtrend, where the price gradually bottoms out and starts rising again, creating a smooth, rounded U-shape. This shows that sellers are losing strength and buyers are starting to gain control. The “handle” is a short consolidation or pullback that follows the cup formation, where the price may slightly drift lower or move sideways before breaking out.

What makes this pattern interesting is how it reflects real trader psychology. At first, there’s a phase of decline and uncertainty, followed by stabilization as buyers step in. The handle represents hesitation before confidence returns, and once it breaks out, it’s like the market saying, “We’re ready to go higher!”

Many traders look for this pattern because it offers a clear structure, defined entry points, and a logical price target. A breakout above the handle’s resistance level often triggers increased buying activity and strong upward momentum

Patterns like the Cup and Handle give structure to trading decisions. For someone like me who was once overwhelmed by the noise in charts, this pattern became a way to bring clarity to the markets. It helps you understand how fear, patience, and optimism all play a role in price movements. Every time I spot this pattern forming, I feel more prepared and less anxious. Of course, it’s never a guarantee — but it offers a framework that helps me navigate trades with discipline and a plan.

The Cup and Handle pattern is one of the most powerful and trusted chart patterns, with a win ratio probability of around 65% to 75%. This means that in most cases, the price successfully breaks out after the pattern completes, offering traders a high-probability setup to ride bullish trends

Structure of the Cup and Handle Pattern

1. Cup

  • Shape: U-shaped (rounded bottom), resembling a bowl.
  • Formation: Occurs after an uptrend, where the price retraces (declines), stabilizes, then rises back to the previous high.
  • Volume: Typically decreases during the formation of the cup and increases as price moves up to the prior high.

2. Handle

  • Shape: Small consolidation or pullback after the cup is complete.
  • Trend: Often downward or sideways, forming a small flag or pennant
  • Duration: Shorter than the cup; usually about 1/4 to 1/3 the length of the cup.
  • Volume: Usually light, followed by a volume spike on breakout.

Price Target

To estimate the price target after breakout:
Target = Breakout Level + (Height of Cup)

To estimate the price target after a Cup and Handle breakout, you first identify the breakout level — this is where the price moves above the handle’s resistance. Next, you measure the height of the cup, which is the difference between the cup’s lowest point and the resistance level. Finally, you add this height to the breakout level to get the target price. This method gives traders a clear and logical way to set profit goals based on the pattern’s structure. It helps in planning trades with realistic expectations

Example: Transrail daily chart timeframe


Cup Formation

  • Start of decline: Late January 2025 (around ₹700+)
  • Bottom of the cup: Mid-April 2025 (~₹400–₹420 range)
  • Recovery back to prior high: By late May–early June, price reclaims previous highs
  • (~₹680-700)
  • Shape: Nicely rounded, gradual recovery – ideal U-shape

Handle Formation

  • Pullback after cup top: Early June 2025
  • Handle range: ₹700–₹600 (approx.)
  • Breakout from handle: Around late June–early July with strong green candles
  • Volume: Increases on breakout – a bullish confirmation

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