Re: Cup with handle (1 Rating)

the editor and founder of investors business daily has written and studied on technical analysis and the cup and handle is certainly a very important indictor of a coming breakout. it certainly doesnt guarantee one, but it very often precludes one... im undecided on how much of that correlation is due to the "self-fulfilling prophecy" or how much is just just market logic logically, it makes sense because the left side of the cup should represent a pullback after a steady rise. That pullback will level off, maybe having a couple valleys, and then the stock should form the right side of the cup as it recovers traction and the sellers start to disappear from the leftside sell-off. The stock will then make a rise in value, followed by a smaller, shallower dip which will form a handle. The handle should be about half the depth of the cup, and should include at least one sharp downward spike in which the weak hands sell their shares...also the handle should have a clear downward orientation, otherwise it will not effectively shake out the weaker hands. that selling of shares by the weak hands and the stocks return to its highs will likely propel the stock a new highs where it will eventually level off and form a new base of some sort if it can find support at its new levels. the remaining holders give the stock support because they not only anticipate a breakout but they have already held through the handle without selling. hope that helps