Cup w/ Handles

[IIC]

I would like to know if anyone would be interested in a thread (this one) where we could post stocks that have Cup w/ Handle chart patterns???

They don't have to be "Classic"...But they should have a fairly close pattern meeting the criteria.

I figure Canslimmers would like it...And even us Modified or Former Canslimmers too...

To be honest, I really don't consider the C w/ H pattern to be Canslim...CS just adopted it from the old Saucer w/ Platform pattern by Jiler.

We could post those that meet the criteria and those that "Almost Meet It"

I like the chart pattern...Does anyone else???

[mimo_100]

Hello Doug,

I am interested in learning about this chart pattern -- I do not have any experience in it now -- but I think this is a great idea.

How does a person "screen" for this chart pattern?

Tim

[New-born baby]

Sure Doug. Let's have it!

[peanuts]

defining Cup with Handle

I have found no better definition and explanation of the classic Cup and Handle continuation formation than what stockcharts.com publishes:

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:cup_with_handle

What they don't publish, is the information about C&H failures. It has been my observations that when a C&H fails and the stock breaks-down, the downside can be just as, if not more dramatic than the upward escalation of a breakout. This is one area than WON briefly discusses in his book, but does not delve deeply into the thought because his book is structured to be on the long side of stocks.

In my opinion, it is very important to close your position if the price action begins to go against the breakout pattern. Sticking to the definitions and parameters will save your butt. The pattern is not perfect and does not always work, so keep that in mind if you decide to trade C&H's. The breakout targets are amazingly accurate, however. So, it is OK to buy in the middle of a stock's run-up while it is on its way to the target from a classic breakout. But stay within the definitions and parameters, and you'll do just fine- don't get fancy with it, and don't apply your own definitions unless they are similarly backed up by the substantial research which supports the classic pattern!

[IIC]

As far as screening for it...I don't know. At one time I had a friend what set up a program to do so. However, I'd say only about 15% of those he came up with actually fit the criteria.

We can talk more about the pattern over the weekend...But here are 3 sites that I have on my Useful Links page:

http://baresearch.com/education/technical_analysis/chart_patterns/continuation/cup_handle.php

http://www.chartpattern.com/cup_handle.html

http://www.haikulabs.com/mh.htm

[New-born baby]

I have found no better definition and explanation of the classic Cup and Handle continuation formation than what stockcharts.com publishes:

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:chart_patterns:cup_with_handle

What they don't publish, is the information about C&H failures. It has been my observations that when a C&H fails and the stock breaks-down, the downside can be just as, if not more dramatic than the upward escalation of a breakout. This is one area than WON briefly discusses in his book, but does not delve deeply into the thought because his book is structured to be on the long side of stocks.

In my opinion, it is very important to close your position if the price action begins to go against the breakout pattern. Sticking to the definitions and parameters will save your butt. The pattern is not perfect and does not always work, so keep that in mind if you decide to trade C&H's. The breakout targets are amazingly accurate, however. So, it is OK to buy in the middle of a stock's run-up while it is on its way to the target from a classic breakout. But stay within the definitions and parameters, and you'll do just fine- don't get fancy with it, and don't apply your own definitions unless they are similarly backed up by the substantial research which supports the classic pattern!

You are correct, Peanuts, because a failed cup w/ handle is actually a double top formation. If the trade goes against you, then you should turn around and go short.

[IIC]

I was pretty busy today but I did have time to set up some scan criteria...Most were so-so...require a lot of chart views...Not really a problem as I LOVE looking at charts...Will work on it more over the weekend.

There are sites that SELL their findings or software for pattern recognition...In the past some friends and I have signed up for trials and shared results...Not very good from what we found...Most of their scans don't come up with much unless you have a "Vivid Imagination"...But we are trying some new things and I'll keep you posted...My idea is that we share the one's we find..."Classic" and "Not So Classic".

Over the weekend I will post the types(criteria) that I would like to see...But I'm all for sharing the "ALMOST" Cup w/ Handles...Best, Doug(IIC)

[IIC]

Personally...I don't think these $300 a year sites are really worth it...For example, since my last post I spent 9 mins looking at 258 charts...Bamm, Bamm, Bamm...Only looking for Cup w/ Handle patterns...In only 9 mins I found 5 of them that were excellent...Pattern-wise only of course...So many of these paid sites seem to throw up stuff that isn't even close.

[mimo_100]

Personally...I don't think these $300 a year sites are really worth it...For example, since my last post I spent 9 mins looking at 258 charts...Bamm, Bamm, Bamm...Only looking for Cup w/ Handle patterns...In only 9 mins I found 5 of them that were excellent...Pattern-wise only of course...So many of these paid sites seem to throw up stuff that isn't even close.

Doug,

When you were looking, what made you choose one chart pattern over another? Is the cup 10 days wide or 100 days wide? If you can define
the details, I will write a program to screen for Cup w/ Handle patterns...

Tim

[skiracer]

I think it would be very hard to set up a scan to find cup and handle bases. I've never seen one or heard of one. To many parameters that haven't happened with the cup base as it bottoms and then makes the right side of it's cup. You could set up a scan writing your own code to find stocks that dropped, bottomed, and are now at the level of where the left side of the developing cup was at a couple of months previous just as the drop started to develope and the right hand side of the cup base is now at. That would give you the cup parameters maybe, and then you could try to write something for the handle but I think it would be real hard.
One of the scans that I run is looking for 52 week lows. You can right your own code or use on of a number of 52 week lows scans that are at a number of sites like BarCharts or StockCharts. Once I have the 52 week lows I look at everyone one of their charts and you will find stocks and charts that are bottoming or have bottomed and now either are or might be making that move up the right side of it's cup base to form the right side of the cup. To get the handle you have to put the ones you like on a watchlist and watch them develope. I catch a number of stocks that have bottomed and are getting ready or are moving up that right side from their bottom. It's a nice and profitable ride up that right side. Keep watching as they then make their handle and presumable break out from the cup and handle base. It's a method that I have been using for a few years and has been quite profitable for me when they work out as expected.

O'Neil's definition requires that the cup base itself be at least 6 to 8 weeks duration but many are longer or much longer so that makes writing the code somewhat harder.

[IIC]

Here is a brief IBD definition of a Cup w/ Handle:
http://tinyurl.com/2wr4te
And more from IBD on the pattern:
http://tinyurl.com/35xzqo

Now, I believe the difficulty in writing a scan is that there are varying opinions as to what really constitutes a Cup w/ Handle. Even in IBD's description the criteria time frames and percentages can vary widely. I've seen many of the C w/ H examples they give and some of them don't look like Cup w/ Handles to me.

Also, there are varying stages that one might look for the pattern...Most would look for the pattern when the handle is forming...But a more patient investor might also look for the pattern in the early stages...Say, when the right side of the cup is forming. Of course at the right side cup forming stage the chances of the pattern completing the total pattern are much less...But it could be used for a watch list. Also, years ago I used to buy many when the right side was forming and then bailing when the handle formed(if it did anyway.

There is also a volume consideration during the chart formation. A "Classic" CwH will have lower volume at the bottom of the cip w/ increasing vol. as the right side high is reached...As the handle forms in a downward slope the volume should again be low. Of course, if the handle turns upward the volume should increase and as it breaks out past the right side cup high the volume should be high.

The pivot point is normally thought to be 10 cents above the right side high. I prefer the "Flash Point" though which is 1 cent over the right side high. In some cases, if you are watching the price/volume closely a trader may want to get in just under the "Flash Point"...Probably a greater chance of failure but if you are right you can make some extra bux. That is what I did w/ SWC the other day.

There is also a consideration...Not sure if it is true???...that some big money may try to drive a stock in this formation up to the pivot point figuring that many will buy there. Then, the big money bails as the stock is shooting up...This could cause the breakout to soon fail. Is this true???...I really don't know.

There are sites that offer you Cup w/ Handle stocks...In the past, I've been able to temporarily get access to Cupwatch and Marketscreen...Unfortunately, their ideas of what constitutes a Cup w/ Handle doesn't make much sense...Most were not even close.

More later...Doug

[Lyehopper]

OK.... so who's gonna post a chart?

Guess I will....

I like EDS, nice clean chart here with no gaps.... They are to post earnings on May 3rd.... I think it'll break out of this latest "little cup" formation and roll.

[Tatnic]

I'm pretty fond of the double-d cup formation, as long as its natural.

[Lyehopper]

I'm pretty fond of the double-d cup formation, as long as its natural.

ya know, I figured you were the kinda fella that was turned on by stretch marks.

[skiracer]

Also, there are varying stages that one might look for the pattern...Most would look for the pattern when the handle is forming...But a more patient investor might also look for the pattern in the early stages...Say, when the right side of the cup is forming. Of course at the right side cup forming stage the chances of the pattern completing the total pattern are much less...But it could be used for a watch list. Also, years ago I used to buy many when the right side was forming and then bailing when the handle formed(if it did anyway.

Doug,
I've been stating what you just stated about catching them when they are getting ready to make the right side of the cup for more than two years now. This is exactly what I was stating in my previouos post. Did you read it or I guess you did.

Lye,
I like the second cup moreso than the first one. The handle on the first one should probably be that first drop and the second one looks to be a failed breakout which after if failed did eventually breakout to go into that second cup. Nice cups though and good examples.