M4 · Part 2 — Tops & Bottoms (reversals) · Lesson 54/144
5 min 45 XP
A cup and handle is a rounding bottom (the cup) followed by a small, tidy pullback near the rim (the handle), then a breakout above the rim. The handle is a final shakeout — weak hands sold one last time before the move — which is exactly why the breakout that follows is so reliable. It is usually a bullish continuation pattern, forming after an existing uptrend pauses.
How to trade it
Enter on the breakout above the rim (out of the handle), or its retest. Stop just below the handle. Target the depth of the cup projected up from the rim. The inverse cup and handle is the exact mirror at a top: an inverted cup, a small bounce for the handle, then a breakdown.