Swing trading
How do I identify and trade a structural multi-month cup and handle accumulation base?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A cup and handle is a multi-month basing pattern resembling a rounded bottom (cup) followed by a smaller pullback (handle) near prior highs, commonly interpreted as accumulation before a potential breakout.
How it works
Traders typically wait for price to break above the handle's resistance on increased volume, treating the depth of the cup as a rough gauge of the pattern's subsequent breakout target.
An example
A stock that declines 25% over four months, rounds back up to its prior high, then pulls back 10% in a tight handle before breaking out may fit the cup and handle pattern.
Risk & limitations
Cup and handle patterns can fail, especially in weak markets, and subjective pattern identification means different analysts may draw the pattern boundaries differently.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.