Also known as: Cup with handle · Cup and handle base
The cup and handle is a bullish continuation pattern made of a rounded, U-shaped base (the cup) followed by a smaller, shallow pullback near the top (the handle). It forms after an uptrend, and a decisive close above the rim of the cup, the resistance at the top of both sides, signals that the advance may resume.
The pattern reflects a gradual shift of control: sellers push price down, interest slowly returns, and a final shake-out in the handle clears out weak holders before the breakout.
What the pattern looks like
After a rally, price sets a high, the left rim, and begins a gradual decline. Rather than a sharp V, the bottom is rounded, showing that selling dries up slowly. Price then climbs back to around the original high, forming the right rim. Instead of breaking out immediately, it pulls back a little, forming the handle, often as a small flag or drift lower. A close above the rim completes the pattern.
The rounded shape is what distinguishes it from a double bottom or a V-shaped recovery.
How to identify it
- Prior uptrend. The cup is a pause within an advance.
- Left rim. A swing high that becomes the pattern’s resistance.
- Rounded cup. A gradual, U-shaped decline and recovery, not a sharp V.
- Reasonable depth. The cup retraces a moderate share of the prior rally; very deep cups are less reliable.
- Right rim. Price returns to roughly the left rim’s level.
- Handle. A short, shallow pullback in the upper part of the cup, on lighter volume.
- Breakout. A close above the rim, ideally on rising volume.
How to trade it
Entry. The common trigger is a close above the rim (or above the top of the handle, if it slopes down). A breakout that quickly falls back below the rim is a warning sign.
Stop. A typical stop sits below the handle’s low. That keeps risk tight; a wider alternative is below the middle of the cup.
Target (measured move). Measure the depth of the cup from the rim to its lowest point and add it to the breakout level.
Worked example: a stock forms a cup with a rim at $62 and a bottom at $40, a depth of $22. The handle pulls back to $56. After a close above $62, the measured-move target is $62 + $22 = $84. With a stop below the handle at $55.50 and an entry at $62.50, the risk is $7 for a potential $21.50, about 3:1. Plan your own trade with the risk/reward calculator and the position size calculator. The Fibonacci calculator helps check how deep the cup retraced the prior advance.
Confirmation: volume, RSI, sentiment
- Volume. Volume usually declines into the bottom of the cup, rises on the right side, fades during the handle and expands on the breakout.
- RSI. A steady RSI recovery along the right side of the cup, holding up during the handle, supports the bullish case. A breakout with weakening RSI is less convincing.
- Sentiment. Cups often form during a period of fading interest; renewed attention near the rim can fuel the breakout. If enthusiasm is already extreme at the rim, the handle may turn into a deeper pullback.
Common mistakes
- V-shaped cups. A sharp drop and rebound is not the same pattern and tends to be less stable.
- Deep handles. A handle that falls into the lower half of the cup undermines the setup.
- No prior trend. A cup in the middle of a long downtrend is a bounce, not a continuation.
- Buying the right rim. Entering before the handle and breakout exposes you to the handle’s pullback.
- Ignoring time. On daily charts, cups that form in only a few days rarely carry much weight.
Pattern statistics caveat
The cup and handle is a well-known base pattern, but it does not work every time, and its behaviour varies by market, timeframe and conditions. Its subjective elements, such as how round the cup is or how deep the handle can be, make precise success figures unreliable. Use it to define a clear breakout level and invalidation. Compare it with the bull flag, the ascending triangle and the inverse head and shoulders.
Spot it automatically with SnapPulse
SnapPulse turns a photo or screenshot of a candlestick chart into a structured plan in about five seconds: the detected pattern with its bias and confidence percentage, the rim and other key levels plotted on the candles, and an entry zone, stop, target and reward-to-risk ratio. The Coach can then explain the read in plain language. Download SnapPulse to try it.
Educational content — not financial advice.
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