Cup & Handle

What is a Cup & Handle?

A cup and handle is a bullish continuation pattern popularized by William O'Neil. After an advance, price carves a rounded, U-shaped basin (the cup), recovers toward the prior high, then drifts back in a shallower pullback (the handle) before resolving higher. The rounded base matters: a sharp V-shaped recovery lacks the gradual hand-off from sellers to buyers the pattern is meant to capture. In the common reading the handle forms in the upper part of the cup, holds well above the cup's low, and ideally drifts down on shrinking volume.

The pattern completes on the breakout above the handle high (the pivot), and the measure rule projects the cup's depth from that point as an objective. An inverted cup and handle is the bearish mirror: a dome, a weak bounce, then a breakdown. Without the handle, the base is simply a rounding bottom.

How traders use it

• As a continuation entry: a buy stop above the handle high catches the breakout, with the protective stop under the handle low so a failed break exits quickly.
• As a target framework: the cup's depth projected upward from the pivot gives a measured objective, often used as a first scale-out level rather than a fixed exit.
• As a quality filter: shallow handles that drift down on drying-up volume are preferred; a handle that gives back most of the cup, or forms in its lower half, weakens the setup in the classic reading.