Have you ever found or received something rare? A typewriter or an old dollar note? What were your emotions? Delighted, honored, lucky,
treasured?To get more news about
WikiFX, you can visit wikifx official website.
Those emotions are elicited whenever I see this chart pattern. This chart pattern is rare and explosive in nature, often bringing in the
money in a short period of time. What is this chart pattern? Why is it
explosive?This chart pattern is caused by profit taking in a bull
market, followed by renewed bullishness.
Heres a quick recap: Prices are in an uptrend in a bull market. On the other hand, prices are in a downtrend in a bear market.
As the cup and handle pattern is caused by profit taking in a bull market, the prior trend must be up.
In other words, this is a continuation chart pattern. Therefore, this chart pattern is usually found in the middle of an uptrend.
The cup and handle pattern looks like 2 “rounding bottoms” stuck to each other. The 1st “rounding bottom” is larger (width and depth) while
the 2nd is smaller.
What happens In the Cup And Handle?
Price has been climbing prior to this chart pattern. The traders who had bought early into the uptrend are sitting on profits. They decide to
take their profits off the table (either partially or fully), resulting
in a decline in prices.
Those who have missed out the initial uptrend spot the decline in prices and feel that it is a worthwhile opportunity to go Long now.
Price starts climbing and it hits a resistance level at the top of the
cup (shown in grey in the diagrams).
The price retreats as traders sell, forming a shallow bottom (left part of the handle). Buying increases and the right side of the handle
is formed. Traders spot this chart pattern and continue buying,
resulting in a breakout in price, keeping the uptrend intact.
