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William O'Neil's signature pattern - a rounded base with a small consolidation handle, launching to new highs
The Cup and Handle is a bullish continuation pattern that resembles a tea cup when viewed from the side. Popularized by William O'Neil in his CANSLIM methodology, it's one of the most reliable patterns for identifying stocks ready to make significant moves.
Why it works: The cup represents a period of consolidation where weak holders sell and strong hands accumulate. The handle is a final shakeout before the move. When volume surges on the breakout, it shows institutional buyers stepping in.
While originally designed for stocks on weekly charts, this pattern works beautifully in crypto on daily timeframes. The psychology is universal - a gradual rounding base followed by a brief pullback before the run.
The Cup and Handle tells the story of a failed breakdown becoming a powerful base. The left side of the cup forms as selling pressure drives price down from a high. The rounded bottom represents a gradual shift - selling exhausts, buyers slowly accumulate, and price begins to recover.
The right side of the cup rising back to the prior high is critical. It means all the sellers from the decline have been absorbed. But the pattern isn't complete yet - at the rim, some early buyers take profits and nervous holders from the left side sell to break even. This creates the handle.
The handle is the final shakeout. It's designed to frustrate - price is so close to breaking out but pulls back one more time. When it finally breaks above the rim, all the breakeven sellers are gone, profit-takers have exited, and the path of least resistance is up.
Buy on break above handle high with volume surge...
7-8% below buy point, or below handle low...
Below the low of the handle. The handle is the final consolidation before breakout - if it breaks down, the pattern has failed. Never place stops below the cup bottom (too wide).
Measured Move: Depth of the cup projected upward from the breakout point (handle high/rim level). T1: 50% of cup depth for conservative exit. T2: Full cup depth projection.
Often 1:3 or better. The handle creates a tight stop relative to the cup depth target, which is what makes this pattern so attractive.
The Cup and Handle is one of the most well-known bullish continuation patterns. Made famous by William O'Neil, it works best in strong stocks and markets where institutional accumulation drives the rounded base.
Always confirm this pattern with volume analysis and higher timeframe context. A pattern in isolation is just a shape - confluence with other factors is what creates high-probability setups.
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