Cup and Handle: Reading a Rounded Base and Its Drift
How the rounded base forms, what the handle adds, and why duration and depth ratios matter more than the drawing.
A cup and handle describes a long rounded recovery back to a prior high, followed by a shallow drift before the level is tested again. It is a base-building description that usually takes weeks or months on daily charts.
Because the shape is drawn freehand, discipline comes from ratios rather than appearance.
The cup
The cup is a decline and recovery that rounds rather than spikes. A V-shaped recovery describes a fast liquidity event; a rounded one describes gradual absorption. Both can precede advances, but they are different observations and should be logged separately.
Depth is worth measuring as a percentage of the prior advance. Very deep cups are better described as new trends recovering than as bases.
The handle
The handle is a shallow drift near the rim of the cup, usually much shorter than the cup itself. A handle that retraces deeply into the cup weakens the description considerably.
The handle's low is the practical invalidation reference for most traders taking the pattern.
Trigger and target
The conventional trigger is a close above the rim, often with the handle high as the specific level. The conventional target projects the cup depth above the rim; structural resistance above frequently arrives sooner.
What invalidates it
A handle that deepens past a third of the cup, or a break below the handle low after a rim break, ends the reading. As always, the higher-timeframe condition determines whether the base matters.