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The Inverse Cup and Handle is a bearish reversal pattern that mirrors the bullish Cup and Handle. It consists of an inverted rounded top (the cup) followed by a small upward consolidation (the handle) before breaking down.
The inverted cup represents gradual distribution as the uptrend rolls over. The handle is a weak bounce — a last gasp of buying before sellers overwhelm and price breaks support.
This pattern often forms at market tops after extended rallies and can signal the beginning of significant downtrends.
The inverted cup shows a slow shift from greed to fear. Early sellers start taking profits, creating the left side of the cup. As price rolls over the top, more holders realize the trend is weakening.
The right side of the cup accelerates as FOMO turns to concern. Buyers who entered near the top are now underwater and looking for exits.
The handle is a relief rally that traps late dip-buyers. When it fails and price breaks below the cup's rim, all the trapped longs from the handle and the cup liquidate, fueling a sharp decline.
Short on breakdown below the cup's rim (support line) with volume confirmation. Aggressive entry on handle failure.
Above the handle's high. This is where the bearish thesis fails.
Measure the depth of the cup and project downward from the breakdown point.
Typically 1:2 or better. Handle provides a tight stop reference.
The inverse cup and handle is most reliable after extended bull runs when sentiment is shifting. It's the bearish mirror of one of the most trusted bullish patterns.
The handle is your edge. It provides a tight stop location that a regular rounding top doesn't give you.
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