Cup & Handle: Rounded Base, Handle, Breakout
A cup and handle is a rounded base (the cup) followed by a smaller pullback (the handle) and a breakout above the cup's rim, often with volume confirmation. It is a continuation shape; the breakout can still fail like any other.
Show the underlying data
| Day | Price / index level | Volume |
|---|---|---|
| 1 | 120 | 1.2 |
| 2 | 114 | 1 |
| 3 | 108 | 0.9 |
| 4 | 104 | 0.8 |
| 5 | 102 | 0.8 |
| 6 | 103 | 0.8 |
| 7 | 107 | 0.9 |
| 8 | 112 | 1 |
| 9 | 117 | 1.1 |
| 10 | 120 | 1.2 |
| 11 | 118 | 0.9 |
| 12 | 116 | 0.9 |
| 13 | 121 | 1.6 |
| 14 | 125 | 1.7 |
The setup
Stock A carves a rounded base from a prior high near the rim at 120, recovering back toward that rim.
What triggers it
Near the rim, a shallow handle pullback forms, then price breaks above 120 (the rim) on rising volume.
What it means
The rounded base, handle, and rim breakout is the cup-and-handle structure. As with all breakouts, a decisive close and follow-through are what watchers look for, and the breakout can still fail.
Confirmation checklist
- Is the base genuinely rounded, with a smaller handle near the rim?
- Did price break the rim decisively on rising volume?
- Did the breakout follow through, or fall back below the rim (a failed break)?
- Remember: continuation patterns can fail; this is not a signal.
Common mistakes
- Forcing a cup-and-handle label onto any rounded move.
- Acting before a decisive close above the rim.
Metric glossary
Breakout
A breakout is when a stock's or index's price moves beyond a previously defined boundary — such as the top of a trading range, a s…
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Support and resistance are price zones on a chart where buying or selling interest has historically clustered, causing price to pa…
Definition →Frequently asked
What is the handle in a cup and handle?
The handle is a shallow pullback near the cup's rim, before the breakout above the rim.
Does a cup and handle always break out?
No. Like any pattern it can fail. Watchers look for a decisive close above the rim and follow-through, with no guarantee.
Is this a buy signal?
No. It is an educational description of a continuation structure, not a recommendation.
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