WEBVTT 00:01.310 --> 00:01.810 Have everyone. 00:01.890 --> 00:05.910 And welcome back to this wealthy education technical analysis video. 00:05.910 --> 00:12.510 Today we're going to be talking about our last continuation pattern and that is the cup and handle pattern. 00:12.630 --> 00:18.750 Let's get right into the cup and handle pächter the cup and handle pattern is named cup and handle because 00:18.750 --> 00:25.630 of the shape of the trading pattern of the stock looks like a teacup. 00:25.780 --> 00:34.780 You have a bowl shaped hole back and the stock and then it moved back porch forms the right hand side 00:34.810 --> 00:36.060 of the cup. 00:36.070 --> 00:46.790 We then have a pull back and the stock Ideally there will be around the mid point between the lip of 00:46.790 --> 00:51.100 the cup and the base of the cup is often more shallow. 00:51.530 --> 01:00.990 And then we'll have a move up in the stock from the downwards sloping cup and when the stock breaks 01:01.110 --> 01:09.060 the downward slope that is the buy signal for the cup and handle pattern the cup and handle forms a 01:09.060 --> 01:16.920 resistance pattern because the lip of the cup on the left side and the right side is a resistance point 01:17.460 --> 01:24.720 and then the handle looks like a flag pattern as the stock pulls back after touching resistance a second 01:24.720 --> 01:25.740 time. 01:25.740 --> 01:33.340 So psychologically you've had owners of the stock who have been under water as the stock pulls back 01:33.390 --> 01:40.670 into the base of the cup when the cup gets back to the right hand side of the lip. 01:40.970 --> 01:42.360 You're back at resistance. 01:42.360 --> 01:46.320 So the buyers who purchase there have been under water the entire time. 01:47.200 --> 01:49.130 The cup has been forming. 01:49.130 --> 01:57.430 Are now selling the stock and pressuring it which causes the handle of the cup your flag pattern as 01:57.430 --> 02:01.990 the stock moves back down from countering selling pressure. 02:02.350 --> 02:10.870 And then you have a move out of the handle to the upside which is your buy signal as a secondary buy 02:10.870 --> 02:11.650 signal. 02:11.650 --> 02:16.700 You can use the resistance level which is formed at the lip of the cup. 02:16.720 --> 02:22.900 So let's take a look at the cup and handle pattern on a chart where to use the chart of HMD Advanced 02:22.900 --> 02:31.210 Micro Devices to look at a cup and handle pattern the beginning of our Cup is here. 02:32.360 --> 02:40.130 We have a pull back and I've drawn a curve so we can see what the cup pattern looks like. 02:41.600 --> 02:50.010 The second Lipp of our Cup is here and then we have a slight pullback and a flag pattern and ideally 02:50.310 --> 02:54.880 we would want the handle to come a little bit lower into the cup. 02:55.140 --> 02:57.240 But the psychology is the same. 02:57.240 --> 03:07.820 The stock has hit the resistance level formed by the left side and the right side of the cup when it 03:07.820 --> 03:14.810 touches that resistance level you get sellers who purchased the stock back at the end of June and are 03:14.810 --> 03:18.220 now back to even and they're selling here in October. 03:18.260 --> 03:25.700 This forces the stock down and they we get a break of both the resistance level and the handle as well 03:25.700 --> 03:28.930 as the resistance level for the cup overall. 03:29.360 --> 03:36.360 As we can see once that resistance level is broken to the upside the stock continues to move up. 03:36.380 --> 03:43.780 So you get a movement from $600 all the way up to around $25 for the high of the stock. 03:43.980 --> 03:50.090 If you remember we talked about earlier that a support or resistance level that has been in place for 03:50.090 --> 03:56.870 a longer period of time usually gives you a bigger move than a support or resistance level that has 03:56.870 --> 04:02.820 been in place for a short period of time with a cup and handle pattern. 04:02.830 --> 04:10.430 We are looking for a move that would equal the measurement from the base of the cup which in this case 04:10.430 --> 04:17.480 was around $11 to the lip of the cup which was around $16. 04:17.610 --> 04:25.920 So we're looking for a $5 move the difference between 16 and 11 when the stock moves up. 04:25.920 --> 04:34.010 We actually end up getting a much larger move than the $5 that we get from not only 16 to 21 which would 04:34.010 --> 04:36.890 have been the $5 move here. 04:38.230 --> 04:44.460 Now we see this stock encountered a little bit of resistance at this point. 04:44.500 --> 04:52.000 It was able to break through retest this resistance level and then move higher up again as we talked 04:52.000 --> 04:54.110 about to the $25 level. 04:54.130 --> 04:59.230 So that is the cup and handle pattern and this stock of HMD. 04:59.380 --> 05:02.140 I hope you've enjoyed this video on the cup and handle pattern. 05:02.140 --> 05:06.240 This is Steven Adams and I look forward to seeing you in future videos. 05:06.250 --> 05:06.590 Thank you.