Cup w/ Handles

[billyjoe]

Matt,
p/w = pivot window: window between low point of handle and flash point. Controversial since it is not known whether stock will "breakout" or "tank" as price hovers in the window. Many investors will take a chance and buy seeing it as a window of opportunity.

----------billyjoe

[IIC]

Matt,
p/w = pivot window: window between low point of handle and flash point. Controversial since it is not known whether stock will "breakout" or "tank" as price hovers in the window. Many investors will take a chance and buy seeing it as a window of opportunity.

----------billyjoe

Billy...good one...I was thinking as I was driving home from work that I would add that...In fact, that is my Fave period of the CwH process...You didn't invent the period...But I will give you credit for giving it the name.

You have cemented your place in the Mr. Breakout Cups w/ Handles Glossary Hall Of Fame for all eternity.

[IIC]

I like to see them with a much more rounded pattern than as jagged as these examples below. I bet if you were to post a number of them randomly the ones with the more conforming rounded bottom with a handle that developes as O'Neil states in his definition would provide a much higher percentage of breakouts than the ones that aren't as close to his definition. I think there is a percentage written somewhere defining the maximum percentage of drop in the handle. The farther you get away from the accepted and held definitions the lower the reliability of the pattern following thru with a breakout. Stockcharts definition below states that the handle shouldn't drop more than 1/3 the depth of the cup. Of course many will argue that you can call it what you want and develope your own definitions and parameters, and you can, but the true percentages usually hold only when the accepted parameters are met.


The Cup with Handle is a bullish continuation pattern that marks a consolidation period followed by a breakout. It was developed by William O'Neil and introduced in his 1988 book, How to Make Money in Stocks.
As its name implies, there are two parts to the pattern: the cup and the handle. The cup forms after an advance and looks like a bowl or rounding bottom. As the cup is completed, a trading range develops on the right hand side and the handle is formed. A subsequent breakout from the handle's trading range signals a continuation of the prior advance.

1. <LI class=level1>Trend: To qualify as a continuation pattern, a prior trend should exist. Ideally, the trend should be a few months old and not too mature. The more mature the trend, the less chance that the pattern marks a continuation or the less upside potential.
   <LI class=level1>Cup: The cup should be "U" shaped and resemble a bowl or rounding bottom. A "V" shaped bottom would be considered too sharp of a reversal to qualify. The softer "U" shape ensures that the cup is a consolidation pattern with valid support at the bottom of the "U". The perfect pattern would have equal highs on both sides of the cup, but this is not always the case.
   <LI class=level1>Cup Depth: Ideally, the depth of the cup should retrace 1/3 or less of the previous advance. However, with volatile markets and over-reactions, the retracement could range from 1/3 to 1/2. In extreme situations, the maximum retracement could be 2/3, which is conforms with Dow Theory.
   <LI class=level1>Handle: After the high forms on the right side of the cup, there is a pullback that forms the handle. Sometimes this handle resembles a flag or pennant that slopes downward, other times just a short pullback. The handle represents the final consolidation/pullback before the big breakout and can retrace up to 1/3 of the cup's advance, but usually not more. The smaller the retracement is, the more bullish the formation and significant the breakout. Sometimes it is prudent to wait for a break above the resistance line established by the highs of the cup.
   <LI class=level1>Duration: The cup can extend from 1 to 6 months, sometimes longer on weekly charts. The handle can be from 1 week to many weeks and ideally completes within 1-4 weeks.
   <LI class=level1>Volume: There should be a substantial increase in volume on the breakout above the handle's resistance.
2. Target: The projected advance after breakout can be estimated by measuring the distance from the right peak of the cup to the bottom of the cup.

As with most chart patterns, it is more important to capture the essence of the pattern than the particulars. The cup is a bowl-shaped consolidation and the handle is a short pullback followed by a breakout with expanding volume. A cup retracement of 62% may not fit the pattern requirements, but a particular stock's pattern may still capture the essence of the Cup with Handle.

• <LI class=level1>Trend: EMC established the bull trend by advancing from 10 and change to above 30 in about 5 months. The stock peaked in March and then began to pull back and consolidate its large gains.
  <LI class=level1>Cup: The April decline was quite sharp, but the lows extended over a two month period to form the bowl that marked a consolidation period. Also note that support was found from the Feb-99 lows.
  <LI class=level1>Cup Depth: The low of the cup retraced 42% of the previous advance. After an advance in June and July, the stock peaked at 32.69 to complete the cup (red arrow).
  <LI class=level1>Handle: Another consolidation period began in July to start the handle formation. There was a sharp decline in August that caused the handle to retrace more than 1/3 of the cup's advance. However, there was a quick recovery and the stock traded back up within the normal handle boundaries within a week. I believe the essence of the formation remained valid after this sharp decline.
  <LI class=level1>Duration: The cup extended for about 3 months and the handle for about 1 1/2 months.
  <LI class=level1>Volume: In early Sept-00, the stock broke handle resistance with a gap up and volume expansion (green arrow). In addition, Chaikin Money Flow soared above +20%.
• Target: The projected advance after breakout was estimated at 9 points from the breakout around 32. EMC easily fulfilled this target over the next few months.

Ski...you are right...there are varying definitions...Even WON himself has changed his own definition(seems like Canslim changes quite a bit the last few years)...He used to say there should be a 30%+ rise to the left side high...Now he says 20%+.

I prefer the rounded bottom too...my own preference is that the right side and left side cup highs are within 5% of each other...It is also preferable that the right side cup high is lower than the left side cup high...I also prefer that the handle goes no lower than 50% of the differnce between the right side or left side cup high(which ever is higher) and the bottom of the cup.(WON calls it differently tho)

I have several links on my CwH page that describe what the writers believe are the criteria.

But no matter what the criteria one uses it is very rare to find a flawless example...Maybe the formation is great but the p/v is not right...something like that...I think most would agree that the volume should be low near the bottom of the cup...High volume in the right side formation and low as the handle forms its downward slope.

I've looked at hundreds of examples of what WON has published over the years...I think I even mentioned an IPO example he gave where the left side high was the day it opened for trade...some examples he gives are pretty perfect while I can't even see the pattern in some.

Anyway...I think it's great to find a Classic...but there are not very many of them.

However...And I want to EMPHASIZE this...Just because a stock has the pattern does not mean it is any good...It takes a lot more work to do well over the long haul than simply looking at chart patterns...All I am trying to do with my CwH lists is save people a little time ( and exhorbiant subscriber fees )to help them in their searches for Tomorrow's Winners

[skiracer]

I think that most people that are new to trading or less experienced at some level should read up on what is the most accepted and used definition of any chart pattern and understand and know the percentages regarding them as stated by the guys who initially defined them. After understanding and trading those patterns as defined with some experience under them should they bend or shape those patterns to better suit their trading strategies. Without understanding the most known and accepted definition, that provides the best chance at the percentages going your way, it is easy to get off on the wrong foot and to find the patterns not developing into what they could or should. Weeding out the patterns that are close but not right comes from understanding exactly what you are looking for and exactly how the pattern should be forming and where to begin to look for any entry or not. Everyone interprets these patterns in the fashion they want to see them. Knowing what is correct and what to really look for it the key to success in using any pattern for trading purposes especially for the less experienced traders listening to anything that more experienced people are stating. Especially if what someone is stating is somewhat off the original and more accepted definitions for any chart pattern.

[IIC]

I think that most people that are new to trading or less experienced at some level should read up on what is the most accepted and used definition of any chart pattern and understand and know the percentages regarding them as stated by the guys who initially defined them. After understanding and trading those patterns as defined with some experience under them should they bend or shape those patterns to better suit their trading strategies. Without understanding the most known and accepted definition, that provides the best chance at the percentages going your way, it is easy to get off on the wrong foot and to find the patterns not developing into what they could or should. Weeding out the patterns that are close but not right comes from understanding exactly what you are looking for and exactly how the pattern should be forming and where to begin to look for any entry or not. Everyone interprets these patterns in the fashion they want to see them. Knowing what is correct and what to really look for it the key to success in using any pattern for trading purposes especially for the less experienced traders listening to anything that more experienced people are stating. Especially if what someone is stating is somewhat off the original and more accepted definitions for any chart pattern.

I have 5 links on my site to different definitions of Cups w/ Handles...There are also various links in the archives at Investors.com (free to non-subscribers). Maybe you should take a look.

[IIC]

ININ leading our CwH list on eps

SIGM lookin' better on 2nd b/o attempt

[IIC]

VSEA f/p is 47.95

[IIC]

LAYN tried to b/o yesterday...It is above f/p now

[New-born baby]

Uri

Check out URI chart sometime, Doug. I think it has run out of sellers.

[IIC]

Check out URI chart sometime, Doug. I think it has run out of sellers.

Perhaps on the lo handle.

Also, FCEL featured in last night's email in the Patterns of Interest...up to resistance

[IIC]

It would be nice if VII could get more volume

[IIC]

I think that most people that are new to trading or less experienced at some level should read up on what is the most accepted and used definition of any chart pattern and understand and know the percentages regarding them as stated by the guys who initially defined them. After understanding and trading those patterns as defined with some experience under them should they bend or shape those patterns to better suit their trading strategies. Without understanding the most known and accepted definition, that provides the best chance at the percentages going your way, it is easy to get off on the wrong foot and to find the patterns not developing into what they could or should. Weeding out the patterns that are close but not right comes from understanding exactly what you are looking for and exactly how the pattern should be forming and where to begin to look for any entry or not. Everyone interprets these patterns in the fashion they want to see them. Knowing what is correct and what to really look for it the key to success in using any pattern for trading purposes especially for the less experienced traders listening to anything that more experienced people are stating. Especially if what someone is stating is somewhat off the original and more accepted definitions for any chart pattern.

Ya know Ski...When we first started trading barbs it was fun...But I have come to the conclusion that you are out in 'La 'La Land.

Why don't you tell us what the success percentages of Bill O'Neils Cup w/ Handles are....I've never seen any.

You are a Guru Follower w/o a mind of his own.

Why don't you tell us what your buddy O'Neil means by this:

Today's Investors.com Email Newsletter headline:

Breakdown of leading stocks spells end of rally

I received that before 8am PDT this morn

But 3 hours earlier I get my copy of IBD (SAME DATE...8/2/07)

The market take in the print edition says:

Day One of Rally Correction

So if I'm a Guru follower like you...What am I supposed to think??????

Your problem is that you have no mind of your own. You know O'Neil didn't discover the CwH pattern...And I challenge you to post his CwH results...But you are trying to say that his definition produces the best results...I'd like to see some evidence of that since you intimate that you have it.

But it doesn't really matter anyway...Because you don't seem to understand that there is more to the market and individual stocks than a simple chart pattern.

Luckily, I found a Beginner's Trading Site for you...Hope it helps you:

http://www.tradejuice.com/trading-for-beginners-menu.htm

[skiracer]

[quote=IIC;85452]Ya know Ski...When we first started trading barbs it was fun...But I have come to the conclusion that you are out in 'La 'La Land.

Why don't you tell us what the success percentages of Bill O'Neils Cup w/ Handles are....I've never seen any.

You are a Guru Follower w/o a mind of his own.

Why don't you tell us what your buddy O'Neil means by this:

Today's Investors.com Email Newsletter headline:

Breakdown of leading stocks spells end of rally

I received that before 8am PDT this morn

But 3 hours earlier I get my copy of IBD (SAME DATE...8/2/07)

The market take in the print edition says:

Day One of Rally Correction

So if I'm a Guru follower like you...What am I supposed to think??????

Your problem is that you have no mind of your own. You know O'Neil didn't discover the CwH pattern...And I challenge you to post his CwH results...But you are trying to say that his definition produces the best results...I'd like to see some evidence of that since you intimate that you have it.

But it doesn't really matter anyway...Because you don't seem to understand that there is more to the market and individual stocks than a simple chart pattern.

Luckily, I found a Beginner's Trading Site for you...Hope it helps you:

Doug,
You're a dumb shit who assumes he knows everything. You know nothing about me but it seems that something about me bothers you whenever I present some opposing view that holds water. The truth of the matter is that you are a dumb shit.

[skiracer]

[quote=IIC;85452]Ya know Ski...When we first started trading barbs it was fun...But I have come to the conclusion that you are out in 'La 'La Land.

Why don't you tell us what the success percentages of Bill O'Neils Cup w/ Handles are....I've never seen any.

You are a Guru Follower w/o a mind of his own.

Why don't you tell us what your buddy O'Neil means by this:

Today's Investors.com Email Newsletter headline:

Breakdown of leading stocks spells end of rally

I received that before 8am PDT this morn

But 3 hours earlier I get my copy of IBD (SAME DATE...8/2/07)

The market take in the print edition says:

Day One of Rally Correction

So if I'm a Guru follower like you...What am I supposed to think??????

Your problem is that you have no mind of your own. You know O'Neil didn't discover the CwH pattern...And I challenge you to post his CwH results...But you are trying to say that his definition produces the best results...I'd like to see some evidence of that since you intimate that you have it.

But it doesn't really matter anyway...Because you don't seem to understand that there is more to the market and individual stocks than a simple chart pattern.

Luckily, I found a Beginner's Trading Site for you...Hope it helps you:

Doug,
You're a dumb shit who assumes he knows everything. You know nothing about me but it seems that something about me bothers you whenever I present some opposing view that holds water. The truth of the matter is that you are a dumb shit.

[IIC]

AMLN...CwH b/o on upgrade: Amylin Pharma Upped To Neutral From Underperform By Cowen