In this video we're taking a look at the cup and handle training patter.
Unlike many of the other chart patterns that we discuss in this module this does not have an inverse
bunt a comp in a handle is pretty straight forward and supposed to represent a tea cup.
Basically it's a rounded bottom which you've learned before and then it's gone a little bit of a pullback
and then eventually a move higher.
It is a reversal signal once a bullish reversal signal it doesn't happen that often necessarily but
it is something that a lot of people will follow.
There is a possible measuring stick with it but most people use it for a trend change period.
They just they don't even necessarily try to measure it.
They just take advantage of it and think about the psychology that's going on here.
We are in a downtrend and things continue to go a little bit lower and people feel better about it.
And then it is kind of quiet down.
Some people will take profit eventually more people will take profit and then people will begin to be
a little bit more concerned.
We start to drift off and then eventually we pick up some momentum.
And trading starts to pick up again.
A lot of times with volume and it just confirmed a reversal pattern at the bottom of a larger move so
on this chart I have a short term cup and handle pattern.
You can see that there's the rounded bottom if you will.
And then there's the handle the handle always pulls back slightly and then you get this massive amount
of volume and then bitcoin just takes off so there's a couple different ways that you could have traded
this potential move you could trying to measure the cup on and handle like this.
So there's your handle and then there's your entire high from eight thousand nine thousand.
And then on the breakout above the top of that resistance barrier you add a thousand because it is a
thousand dollars thick if you will and your target would have been ten thousand you can see that we
did in fact have a little bit of a reaction there.
But why wouldn't you ten thousand dollars is a very large round number and then you just continue higher.
You could have traded it that way.
You could put your stop underneath the handle some traders would just simply hold because they believe
that these patterns these cup and handle patterns are so monumental that they just assume that the trend
continues and in this case that would have paid off all the way to eleven thousand seven hundred fifty
before we got a significant pullback.
You can see that there is a lot to be said for this pattern because it is complex it takes so much time
to set up.
Remember you've got all of that.
It's not even really selling pressure.
It is in the beginning but after that the market just seems to lose interest.
And then there's another attempt to fall from there.
And then it doesn't.
So while the pattern is called the cup and handle you can almost make it something along the lines of
a downtrend followed by general lack of interest.
Another attempt to continue the downtrend followed by a complete lack of interest.
So think about the psychology always you should always think about the psychology of what the participants
are feeling on both sides.
This high volume GREEN CANDLE that breaks out of resistance has the buyers feeling pretty good at the
same time the sellers feel bad.
They have to reverse their position and then we continue to rally cup and handle is a pattern that matters
more on higher timeframes.
But the cryptocurrency world is fairly new so you don't see this a lot.
Say like on the daily and certainly not on the weekly chart however it has its roots in the stock market
which of course a stock like IBM or you know some of the other stalwarts like Amazon Apple certainly
conform these and these can take place over weeks if not months shorter timeframes of course happen
like this example and they do mean the same thing in the cryptocurrency world that's pretty much where
you're going to find these.