The Cup and Handle pattern is a bullish reversal pattern that forms when the price opens and closes near the high of the day, but with a long lower wick. The lower wick indicates that the sellers were able to briefly push the price lower, but the buyers were able to take control and drive the price back up.
The Cup and Handle pattern is similar to the Hammer candlestick pattern, but it has a longer lower wick. This suggests that the buyers were even more aggressive in taking control of the price after the sellers briefly pushed it lower.
The Cup and Handle pattern is typically seen at the end of a downtrend or during a consolidation period. It is a sign that the buyers are taking control of the price and that the trend may be about to reverse.
Confirmation of the Cup and Handle Pattern
The Cup and Handle pattern is confirmed on weekly timeframe chart when the price closes above the high of the Cup and Handle candle. This indicates that the buyers are still in control of the price and that the trend is likely to reverse.
Candle Patterns:
The last candle in the chart show a bullish engulfing pattern. A bullish engulfing pattern is formed when a red candle is completely engulfed by a green candle. This is a strong bullish reversal signal that indicates that the buyers are taking control of the price.
Price Action Pattern Recognition
The Cup and Handle pattern and the bullish engulfing pattern are both bullish reversal patterns. This suggests that the price is likely to reverse and start an uptrend.
Trading the Cup and Handle Pattern
There are two ways to trade the Cup and Handle pattern:
- Long Entry: Place a buy order above the high of the Cup and Handle candle.
- Target: The target for the long trade is the next resistance level.
- Stop Loss: The stop loss for the long trade is below the low of the Cup and Handle candle.
Conclusion
The Cup and Handle pattern is a powerful bullish reversal pattern that can be used to identify potential trading opportunities. By understanding how to recognize and trade the Cup and Handle candlestick pattern, you can improve your chances of success in the markets.
Additional Notes
It is important to note that no candlestick pattern is guaranteed to be successful. It is always important to use other forms of technical analysis and risk management techniques to protect your capital.