All Rights Reserved. Since that time, Investors Business Daily and other popular journals have extended the folklore of this classic pattern. But to this day, few swing traders recognize this formation's versatility or its appearance through all time frames and markets. The generic pattern looks like a rounded cup with a small handle and represents a breakout through a triple top.
Price rallies into a first high, reverses and then pulls back to form the left side of the cup.
The issue eventually finds support and builds a sideways base. A new rally erupts and rises toward the old high. This forms the cup's right side. Sellers appear at the double top and the market pulls back a second time. The next decline draws the smaller handle as price again stabilizes, but this time at a higher level than the last retracement.