What Is Cup and Handle?
The cup and handle is a bullish continuation pattern that resembles a teacup when viewed on a chart. The "cup" is a U-shaped bottom formation, and the "handle" is a small downward drift or consolidation that forms after the right side of the cup reaches the prior high. The pattern was popularized by William O'Neil.
How Cup and Handle Works
The cup should be rounded (not V-shaped), ideally 7-65 weeks in formation. The handle should drift downward (not upward) and retrace no more than one-third of the cup's advance. Volume typically contracts during the handle and expands sharply on the breakout above the cup's rim (resistance). The price target equals the depth of the cup added to the breakout point.
Why It Matters for Traders
Cup and handle patterns in crypto are particularly powerful because the volatile nature of the market creates deeper cups with stronger breakouts. Bitcoin has formed several macro cup and handle patterns preceding its major bull runs. The key is patience — the handle formation is where most traders get shaken out by what looks like a failed recovery.