As of 10/15/2020
  Indus: 28,494 -19.80 -0.1%  
  Trans: 11,989 +101.34 +0.9%  
  Utils: 875 +0.03 +0.0%  
  Nasdaq: 11,714 -54.86 -0.5%  
  S&P 500: 3,483 -5.33 -0.2%  
YTD
-0.2%  
 +10.0%  
-0.4%  
 +30.6%  
 +7.8%  
  Targets    Overview: 09/29/2020  
  Up arrow29,300 or 27,400 by 11/01/2020
  Up arrow12,000 or 11,000 by 11/01/2020
  Up arrow915 or 840 by 11/01/2020
  Up arrow12,800 or 11,300 by 11/01/2020
  Up arrow3,700 or 3,400 by 11/01/2020
CPI (updated daily): Arrows on 9/25/20
As of 10/15/2020
  Indus: 28,494 -19.80 -0.1%  
  Trans: 11,989 +101.34 +0.9%  
  Utils: 875 +0.03 +0.0%  
  Nasdaq: 11,714 -54.86 -0.5%  
  S&P 500: 3,483 -5.33 -0.2%  
YTD
-0.2%  
 +10.0%  
-0.4%  
 +30.6%  
 +7.8%  
  Targets    Overview: 09/29/2020  
  Up arrow29,300 or 27,400 by 11/01/2020
  Up arrow12,000 or 11,000 by 11/01/2020
  Up arrow915 or 840 by 11/01/2020
  Up arrow12,800 or 11,300 by 11/01/2020
  Up arrow3,700 or 3,400 by 11/01/2020
CPI (updated daily): Arrows on 9/25/20

Bulkowski on the Inverted Cup with Handle

 

Statistics updated on 8/26/2020.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 164 to 178. That chapter gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

Inverted cup chart pattern
Inverted Cup with Handle Chart Pattern

 

Inverted Cup with Handle: Important Bull Market Results

Overall performance rank (1 is best): 6 out of 36
Break even failure rate: 18%
Average decline: 17%
Pullback rate: 67%
Percentage meeting price target: 62%

The above numbers are based on 556 perfect trades in a bull market. See the glossary for definitions.

Inverted Cup with Handle: Identification Guidelines

CharacteristicDiscussion
Rounded turnLook for a smooth, rounded looking turn (an inverted cup), but allow exceptions.
Cup rimsThe two cup rims should bottom near the same price.
Cup handleTo the right of the cup should be a handle.
Cup retraceHandle must not rise above the cup top but often retrace 30% to 60% up the height of the cup.
ConfirmationThe pattern confirms as a valid one when price closes below the right cup lip.

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Inverted Cup with Handle: Trading Tips

Trading TacticExplanation The measure rule for inverted cup with handle chart patterns
The Measure Rule

Covering a short trade method

Trendline

Measure ruleCompute the handle height (the distance between the two red lines in the Measure Rule figure to the right). Subtract the result from the price of the right rim low. The result is the price target.
Head-and-shoulders topIf another handle forms to the left of the cup, you might have a head-and-shoulders top chart pattern with a fat head, the shoulders being the cup handles.
ShortWhen price closes below the right rim low, short the stock.
TrendlineDraw a trendline down (if possible) from the handle tops and extend it into the future. When price closes above this trendline, cover your short. I show this in the Trendline figure to the right as price crossing the red line.
Measured move downThe handle may be the corrective phase of a measured move down chart pattern. Use the MMD measure rule to compute a price target.
Yearly lowPerforms best when the breakout is near the yearly low.
Even rimsWhen the cup rims bottom at the same price, the chart pattern tends to perform better than do those with uneven rims. The Trendline figure shows this as the even lows at A and B.
PullbacksPullbacks hurt post breakout performance.

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Inverted Cup with Handle: Example

Inverted cup with handle chart pattern example

The above figure shows an example of an inverted cup with handle chart pattern (in red). Price makes a gentle rounding turn, forming the inverted cup. Following the cup is the handle, a flat region in this example that stretches from March and into April. Price jumps upward for several weeks and creates another inverted cup (in green) before starting a new trend downward.

-- Thomas Bulkowski

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See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

Copyright © 2005-2020 by Thomas N. Bulkowski. All rights reserved.
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Some pattern names are registered trademarks of their respective owners.

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