Trading Defined
Price ActionIntermediate

Cup and Handle

A cup and handle is a rounded, U-shaped recovery followed by a small downward drift (the handle), often read as a pause before a breakout higher.

The cup and handle is a chart pattern that looks like a teacup from the side: a rounded dip and recovery (the cup), then a small, shallow pullback (the handle). Many traders read it as a pause in an uptrend before a possible breakout higher. Like every chart pattern, it can fail.

Category
Price Action
Reading time
3 min
Also called
Cup with handle, Cup-and-handle pattern
Updated

Cup and handle in plain words

The cup and handle is a bullish continuation pattern: a rounded pause in an uptrend that ends with a breakout.1

It shows up during uptrends and points to the rise resuming.2

Once the right side of the cup tops out, a small dip forms the handle, and traders watch for a break above it.1

How to spot a cup and handle

  1. Check the prior trend

    Make sure there was an uptrend first — without one, it isn't a continuation pattern.2

  2. Look at the cup's shape

    Check the cup's shape: a rounded, bowl-like U.1

  3. Reject V-shapes

    Reject sharp V-shaped drops and rebounds; the pattern needs a gradual turn.2

  4. Wait for the handle

    Wait for the handle — a modest pullback after the right side peaks.1

  5. Check handle depth

    Be wary of a handle that gives back more than half the cup's depth; sellers may still be in control.2

  6. Confirm the breakout

    Look for a clear jump in volume when price breaks above the handle.1

Worked examples

Example 1 — Measured target

Target 59

A hypothetical stock's cup runs from a right-side peak of 50 down to a bottom of 40; the handle breaks out at 49.

Example 1 — Measured target — calculation
Cup depth50 − 40 = 10
Target49 + 10 = 59

The target comes from the cup's depth — from its right-hand peak down to its low — added to the breakout point.1

Example 2 — Handle too deep

Pattern weak

A hypothetical cup is 10 points deep, but the handle falls 7 points.

Example 2 — Handle too deep — calculation
Handle / cup7 ÷ 10 = 70%

The handle dropped more than halfway into the cup, a sign of lingering selling, so the setup was treated as weak.2

Example 3 — Quiet breakout

Unconfirmed

A hypothetical handle breaks out on volume below its recent average.

Example 3 — Quiet breakout — calculation
Volume vs average0.8×

The breakout came on ordinary volume, which makes it less convincing.1

Cup and handle vs V-shaped recovery

AspectCup and handleV-shaped recovery
BottomRoundedSharp
HandleSmall pullbackNone
Read asContinuationFast reversal
ConfirmationHandle breakoutVaries

Where traders use it

  • Breakout entries

    Planning a Breakout entry above the handle.

  • Stops

    Placing a Stop Loss below the handle low.

  • Targets

    Setting a Take Profit from the cup depth.

  • Volume checks

    Reading Volume on the breakout.

Advantages and disadvantages

Advantages

  • Gives a clear breakout level.
  • Has a simple measured target.
  • Works on many timeframes.

Disadvantages

  • Shapes are subjective.
  • Breakouts can fail.
  • It can take months to form.
  • Deep or long handles weaken it.

Going deeper

Read as far as you need. Each level builds on the one before it.

The shape

Beginner

A good cup is rounded like a bowl.1 Avoid ones that are V-shaped or very deep.3

The handle

Intermediate

The handle is a small pullback after the right side peaks.1 If it gives back more than half the cup, sellers may still be too strong.2

Targets and volume

Advanced

Measure the target from the cup's depth, and look for a strong rise in volume to confirm the breakout.1

Common mistakes

  1. Calling every dip a cup

    Check for a prior uptrend.

  2. Buying before the breakout

    Wait for the handle to break.

  3. Ignoring volume

    Look for rising volume on the break.

  4. No stop

    Set a stop below the handle.

Check your understanding

Test yourself before moving on. Each answer comes with an explanation.

Q1Cup peak 80, bottom 70, breakout at 79. Measured target =
Q2Which bottom fits a cup and handle?

Key points to remember

  1. A cup and handle is a rounded dip and recovery plus a small pullback.
  2. It is usually read as bullish continuation.
  3. The breakout above the handle is the trigger.
  4. Volume should rise on the breakout.
  5. Deep handles and V-shapes weaken it.

Frequently asked questions

Is a cup and handle always bullish?

Usually read that way; an inverted version is bearish.

How long does it take?

From weeks to many months.

Can it fail?

Yes, breakouts often fail.

Further learning

Sources

This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.

  1. StockCharts ChartSchool. Cup With Handle (opens in a new tab) Checked .
  2. CMC Markets. Cup and handle pattern explained (opens in a new tab) Checked .
  3. IG. Cup and handle chart pattern (opens in a new tab) Checked .

Read more elsewhere

Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. Trading Metrics is our sister site, under the same ownership; we are not affiliated with any other publisher linked above. Last reviewed . Report an error or request a source credit.