Cup and handle
A rounded dip and recovery shaped like a cup, followed by a small pullback shaped like a handle.
What it shows
A cup has a gradual fall, a rounded bottom and a gradual rise back to near the starting level. The handle is a short, shallow pullback just under the right rim.
William O'Neil popularized it as a base pattern. The pattern is complete when price closes above the rim level.
How we find it
The same code that draws it on your chart follows these steps, with the same result every time.
- Find a rounded bottom (a parabola fit) lasting at least 30 bars and at least 12% deep.
- Require the right rim to be within 5% of the left rim.
- Find a handle after the right rim: a pullback of at most one third of the cup depth, in the upper half of the cup, lasting 5 to 20 bars.
- Mark complete when a close rises above the rim level.
Starting values: Cup depth 12% to 35%; Cup length at least 30 bars; Handle depth under 1/3 of the cup depth; Handle length 5 to 20 bars. These are proposed and will be tuned on real price data before launch.
How to read it
- The blue curve is the cup.
- The small dip after the right rim is the handle.
- The dashed line is the rim level that price must close above.
Status labels you may see
| Label | What it means |
|---|---|
| Cup forming | The rounded bottom is present, no handle yet. |
| Handle forming | Pullback after the right rim. |
| Broke the rim | Closed above the rim level. |
What cancels it
A close below the lowest point of the handle, or a handle that is deeper than allowed.
What traders check next
- Volume dries up in the handle and rises on the break, as the original description says.
- Whether the cup is rounded or V-shaped.
- How long the pattern took.
Limits
- Many cups are U-shaped by luck.
- Rules for depth and length are choices.
- Long patterns can mean slow progress.
Try it in forecastviz
- Open any ticker and choose Continuation patterns → Cup and handle in the left menu.
- Switch between 6M, 1Y, 3Y to see how the picture changes.
- Compare with Inverse cup and handle and Rounding bottom on the same chart.
Questions
Where does it come from?
Popularized by William O'Neil in his writing on stock selection.
What if the handle is deep?
It is no longer a handle by our rule.
Related trends
Further reading
- Edwards and Magee, Technical Analysis of Stock Trends
- Bulkowski, Encyclopedia of Chart Patterns
- O'Neil, How to Make Money in Stocks
Educational only. Not financial advice, and not a price forecast. Charts are drawn by code from past price data, which may be delayed.