Cup and Handle
In simple terms
A cup and handle is a chart pattern that looks like a teacup with a handle. When the price dips down and comes back up (forming the cup), then pulls back slightly (forming the handle), it often means the price is about to go higher.
Definition
Bullish continuation pattern resembling a tea cup, signaling upward momentum.
In depth
The cup and handle is a bullish continuation pattern formed by an initial price decline followed by a recovery to near the previous high (the cup), and then a smaller pullback (the handle) before resuming upward momentum. The pattern demonstrates buyer accumulation during the initial dip, followed by a period of consolidation in the handle phase, where selling pressure is exhausted. A breakout above the handle's resistance level typically indicates renewed buying interest and signals continuation of the previous uptrend, with the pattern's depth and symmetry affecting the reliability of the signal.
How does Cup and Handle work?
After an advance, price rolls over into a gradual, rounded decline and recovers just as slowly, tracing a U rather than a sharp V. That is the cup, and it can take weeks or months to form. As price returns to the level where the cup began, it meets resistance and forms a smaller, shallower pullback along that rim: the handle. The pattern is treated as complete when price closes above the resistance line running across the rim. The cup's depth, added to the breakout level, is the usual rough reference. Volume typically dries up through the base.
An example
Illustratively, a token peaks at $60, declines gradually to $40 over three months, then recovers just as slowly to $59 before easing back to $55 for two weeks. The rim sits at $60 and the cup is $20 deep. A close above $60 projects roughly $80 as a reference. The handle failing and price returning toward $40 is equally possible. All figures are invented.
Figures are illustrative only.
What beginners get wrong
- A sharp V-shaped recovery is not a cup, because the pattern depends on a slow rounded base rather than a violent bounce.
- Handles retracing more than roughly a third of the cup's depth are generally considered too deep to qualify as handles.
- Compressing a formation designed for weekly and daily charts onto a fifteen-minute chart copies the shape without the meaning.
- The measured projection is an estimate, not a promise, and a failed breakout can carry price back toward the cup's low.
Related terms
Part of
What is technical analysis, and how are crypto charts read? — the subject page for technical analysis, with all 29 of its definitions in one place.
Educational only — not financial advice.