Cup and handle pattern

A cup and handle is a bullish continuation pattern that shows up on a price chart as a rounded decline and recovery shaped like the letter U, the cup, followed by a smaller, brief pullback near the prior high, the handle, before price attempts to push to new highs. The overall shape resembles a teacup viewed from the side, with the handle forming on the right as a short dip below the rim.

The cup typically forms over weeks or months as a stock pulls back from a high, bottoms out gradually, and climbs back toward that same prior high, ideally with rounded rather than sharp turns at the bottom, reflecting a gradual shift from selling to buying pressure rather than a sudden reversal. The handle then forms as some investors take profits or hesitate right near the old high, causing a shallow pullback, usually smaller and shorter than the decline that formed the cup itself, before buyers step back in.

The pattern is considered complete, and bullish, once price breaks above the resistance formed by the top of the cup and the handle, ideally on higher than average volume. Traders often estimate a price target for the resulting move by measuring the depth of the cup and projecting that same distance upward from the breakout point, similar to how a measured move is calculated for other continuation patterns.