As of 11/08/2024
  Indus: 43,989 +259.65 +0.6%  
  Trans: 17,354 +143.48 +0.8%  
  Utils: 1,032 +20.02 +2.0%  
  Nasdaq: 19,287 +17.32 +0.1%  
  S&P 500: 5,996 +22.44 +0.4%  
YTD
 +16.7%  
 +9.2%  
 +17.0%  
 +28.5%  
 +25.7%  
  Targets    Overview: 10/31/2024  
  Up arrow43,100 or 41,250 by 11/15/2024
  Up arrow16,800 or 15,700 by 11/15/2024
  Up arrow1,075 or 1,000 by 11/15/2024
  Up arrow19,000 or 17,600 by 11/15/2024
  Up arrow5,900 or 5,600 by 11/15/2024
As of 11/08/2024
  Indus: 43,989 +259.65 +0.6%  
  Trans: 17,354 +143.48 +0.8%  
  Utils: 1,032 +20.02 +2.0%  
  Nasdaq: 19,287 +17.32 +0.1%  
  S&P 500: 5,996 +22.44 +0.4%  
YTD
 +16.7%  
 +9.2%  
 +17.0%  
 +28.5%  
 +25.7%  
  Targets    Overview: 10/31/2024  
  Up arrow43,100 or 41,250 by 11/15/2024
  Up arrow16,800 or 15,700 by 11/15/2024
  Up arrow1,075 or 1,000 by 11/15/2024
  Up arrow19,000 or 17,600 by 11/15/2024
  Up arrow5,900 or 5,600 by 11/15/2024

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

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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

 

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