Cup and Handle
A rounded bowl-shaped base followed by a small downward drift (the handle) — a bullish continuation pattern preceding a breakout to new highs.
The Cup and Handle consists of a rounded "U"-shaped cup — a slow, smooth base that can span weeks to months — followed by a handle: a brief, shallow drift or tight consolidation that retraces no more than 50% of the cup's depth.
A volume-backed close above the handle's upper resistance confirms the breakout. Target = cup depth projected upward from the breakout point. The flat base of the cup and the tight handle are the hallmarks of a strong setup.
- Developed by William O'Neil. Common in growth stocks before major runs.
- Handles that tilt sharply downward or are too deep invalidate the setup.
Example
A biotech stock bases for 4 months rounding from $50 down to $44 and back to $50, then drifts sideways in a 3-week handle between $49–$50. A close above $50 with heavy volume triggers a $6 target to $56.
Related Terms
Breakout Retest
Price returning to test the former breakout level after the initial break — a resistance-turned-support confirmation and lower-risk entry point.
BeginnerBull Flag
A sharp upward pole followed by a tight, slightly downward-drifting consolidation channel — a high-probability continuation setup in strong uptrends.
BeginnerContinuation Pattern
Any pattern that forms mid-trend and resolves in the same direction as the prior move — flags, pennants, and triangles are the most common.
BeginnerDouble Bottom
Two consecutive troughs at approximately the same price level, forming a "W" shape, signalling support and potential upside reversal.
BeginnerMeasured Move
A technique projecting a price target by duplicating a prior swing move from a breakout or consolidation point.
BeginnerRounding Bottom
A gradual, semicircular base where selling pressure slowly transitions to buying — a long-term bullish reversal pattern.
Intermediate