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Cup and Handle Chart Formation
The Cup and Handle is a popular patter than can be seen on bar charts.
As the name suggests, we can see the appearance of a U-shaped pattern followed by a small handle type projection on the chart.
Technical analysis look for the formation of a U shape curve with a small handle. This mostly appears on weekly charts.
In most cases the right handle part will have low volumes for a 7 - 65 week period
The pattern is a continuation pattern and a break out from the handle can be considered as a good buying opportunity.
In some cases we see a V-shaped pattern instead of a U-shaped pattern.
U-patterns are better than V-patterns though both qualify.
As the price keeps dropping in the left-part of the U-shape, volume should decrease as prices decline and remain lower than average in the base of the bowl.
Volumes should then increase when the stock begins to make its move higher towards the latter part of the cup.
Some times a U-pattern might lead to a double pattern instead of the formation of a handle.
This means that the handle will break support and lead to the formation of a W-pattern.
W-patterns are even better and a handle may be formed for the latter part of the W.
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