It's tea time! Coffee, too, if you prefer!
Well... not really. It's time to learn about one of the most utilized patterns in any type of trading, whether it be crypto or the stock market, called "The Cup & Handle Pattern".
The cup & handle pattern was first coined by American entrepreneur William J. O'Neil in 1988, in his book called "How to Make Money in Stocks". He outlines certain patterns in markets with dips and rises, mainly the cup & handle. He describes this pattern to be crucial when figuring out when resistance will be met and break through. Let's take a dive into this pattern and go over crucial points to help you decide for yourself when your next move will be!
I am not sponsored by anyone or anything mentioned in this article.
This is not financial advice. I am not a financial advisor.
Please do your own research before making any decisions before investing.
This article is meant for educational purposes only.
To the newbie, it looks like there's a lot of crap going on in the diagram above. I'm going to make it real easy for us and break it down step by step down below to describe what each section means in layman's terms. So don't worry, you don't need to freak out anymore.
Let's get started!
Cup: The "cup" represents a dip typically seen after a bull run, or when the price is substantially rising above average. Most times, the price will begin to slowly decline and often find stability slightly higher than when the bull run began. The longer "U" shaped the cup, the greater sign that it's about to break through its' resistance. Individuals state (and I would have to agree) to stay away from sharper "V" shaped cup patterns, as this means the price will remain volatile.
Handle: The "handle" is a smaller dip once the crypto or stock begins to hit its' resistance mark, takes a short dip, and will typically begin to rise. This is where the "bulls", or aggressive buyers, will come into play and load up on their stake, probably because they have been watching the cup take shape. The handle is still slightly below the pricing at the height of the initial bull run so, ideally, this would be the time to buy if everything plays out accordingly.
Conservative Buy: When the price breaks through resistance and is back at its' price at the height at the previous bull run, this is where "conservative buyers" come in to snag their stake. They realize that if the price is back at it's previous ATH (all time high), it's prevalent that another spike in price is about to occur. Typically. Conservative buyers are crucial to the market, as they help the crypto or stock continue to rise during the bull run, since they will continue to buy once FOMO (fear of missing out) sets in.
Projected Target: The projected target price can usually be calculated by taking the depth price in the bottom of the cup and the peaks, or tops, of the cup. All you do is you add both of these prices together and you should have your projected target price post-resistance breakthrough. This is where you can expect the price to peak and continue through the entire cup and handle pattern.
Given that the crypto market is extremely volatile, this pattern will not work 100% of the time, just like any other patterns or methods of data tracking. You should always, always do your own research and data tracking prior to making any moves in any market. I hope this article explained everything easily and efficiently for everyone reading. If so, you now have an understanding of what the Cup & Handle Pattern is and now you can confidently look for treads on your favorite cryptos yourself!
All while sipping on a cup of your favorite coffee or tea!
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