Definition
A cup with handle is a bullish continuation pattern that resembles a teacup viewed in profile. The cup is a rounded, U-shaped base that forms after a price advance; the handle is a smaller, shallow pullback that develops near the cup's right rim before the price breaks out.
The pattern signals that a stock has digested a prior gain, shaken out weak holders during the cup, and made one final brief consolidation in the handle before resuming higher.
Why it matters
How it works
The cup forms over weeks or months as price declines, rounds out, and recovers toward its old high. Near that high, a handle develops as price drifts gently lower on light volume, typically in the upper half of the cup. The buy signal comes when price breaks above the handle's high, ideally on expanding volume.
Traders often project a target using the measure rule, applying the cup's depth to the breakout point. A shallow handle and contracting volume through the base are generally treated as signs of a stronger setup.