Study the cup and handle as a defined sequence of swings, then record both confirmed and failed exits with the same rules.
Identify the swings and the boundary
A cup and handle has a rounded retreat from a rim, a recovery toward that rim and a shorter pullback forming the handle. The handle sits above the cup low; here it is also above the cup midpoint. A sharp V-shaped rebound and a deep second decline deserve different descriptions.
Read the formation in its preceding trend
The conventional continuation formation begins after an advance. The cup can take much longer than the handle. These compressed hypothetical daily points make the geometry visible; they do not prescribe a universal formation duration.
Use an explicit confirmation rule
The example closes above the rim at 60 after the handle. A handle that breaks through the cup low destroys this definition. Record whether confirmation uses the rim or a separately drawn handle boundary, since those can give different event dates.
| Measure | Value |
|---|---|
| Confirmation session (first bar is session 1) | 53 |
| Boundary | 60.00 |
| Confirming close | 61.00 |
| Formation extreme | 45.00 |
| Formation height | 15.00 |
| Geometric objective | 75.00 |
Height = |45.00 − 60.00| = 15.00
Objective = 60.00 + 15.00 = 75.00The objective illustrates a measuring convention. It supplies no probability, expected return or evidence that a trade reaches that price. Keep the projected level separate from the actual chart observations and from a written risk plan.
Compare volume on the same daily basis
Compare each swing and the confirming session with this stock’s own daily volume. Quiet activity around a base and expansion on an exit are conventional context, but they do not establish direction or identify who traded. An event can dominate a single volume bar.
| Measure | Value |
|---|---|
| Confirmation volume | 220.00 |
| 20-session average including confirmation | 107.10 |
| Relative volume | 2.05× |
Including the current session in the average differs from dividing by the prior 20 sessions. An intraday comparison at the same clock time uses another denominator. State which one you use before comparing examples.
An exit that does not persist
The second chart clears the rim briefly, then loses the handle area and drops below the cup low. A rounded recovery did not ensure continuation. The earlier rim remains an observation, not evidence that price must return to a projected objective.
Distinguish nearby formations
A rounding bottom has no separate handle. A double bottom has two pronounced troughs and an intervening rebound. The inverse cup and handle is a downward counterpart with a rounded crest.
Keep a reproducible research record
Apply the same swing definition and boundary rule to every chart in a sample. Formations become visible as later bars confirm swings, so preserve the date on which each observation was knowable.
- Record the preceding trend, candle interval, price scale and corporate-action basis.
- Label the swings and write a boundary rule before viewing the later path.
- Record the confirming close, subsequent retest and the price that invalidates the premise.
- Compare volume on a named denominator and retain failed exits as well as resolving examples.
- Review earnings and other events, execution costs and gap risk separately from the geometric drawing.
These formations are studied by reading charts. A list of stocks near a high or low does not identify this pattern.
Sources
- Edwards, Magee and Bassetti, Technical Analysis of Stock Trends, 11th edition: reversal formations and measurement conventions
- StockCharts ChartSchool: Cup and handle (checked October 1, 2026)
Read our data and methodology notes for calculation context. This guide explains research tools and observations. It does not recommend a trade or investment.