Have everyone.
And welcome back to this wealthy education technical analysis video.
Today we're going to be talking about our last continuation pattern and that is the cup and handle pattern.
Let's get right into the cup and handle pächter the cup and handle pattern is named cup and handle because
of the shape of the trading pattern of the stock looks like a teacup.
You have a bowl shaped hole back and the stock and then it moved back porch forms the right hand side
of the cup.
We then have a pull back and the stock Ideally there will be around the mid point between the lip of
the cup and the base of the cup is often more shallow.
And then we'll have a move up in the stock from the downwards sloping cup and when the stock breaks
the downward slope that is the buy signal for the cup and handle pattern the cup and handle forms a
resistance pattern because the lip of the cup on the left side and the right side is a resistance point
and then the handle looks like a flag pattern as the stock pulls back after touching resistance a second
time.
So psychologically you've had owners of the stock who have been under water as the stock pulls back
into the base of the cup when the cup gets back to the right hand side of the lip.
You're back at resistance.
So the buyers who purchase there have been under water the entire time.
The cup has been forming.
Are now selling the stock and pressuring it which causes the handle of the cup your flag pattern as
the stock moves back down from countering selling pressure.
And then you have a move out of the handle to the upside which is your buy signal as a secondary buy
signal.
You can use the resistance level which is formed at the lip of the cup.
So let's take a look at the cup and handle pattern on a chart where to use the chart of HMD Advanced
Micro Devices to look at a cup and handle pattern the beginning of our Cup is here.
We have a pull back and I've drawn a curve so we can see what the cup pattern looks like.
The second Lipp of our Cup is here and then we have a slight pullback and a flag pattern and ideally
we would want the handle to come a little bit lower into the cup.
But the psychology is the same.
The stock has hit the resistance level formed by the left side and the right side of the cup when it
touches that resistance level you get sellers who purchased the stock back at the end of June and are
now back to even and they're selling here in October.
This forces the stock down and they we get a break of both the resistance level and the handle as well
as the resistance level for the cup overall.
As we can see once that resistance level is broken to the upside the stock continues to move up.
So you get a movement from $600 all the way up to around $25 for the high of the stock.
If you remember we talked about earlier that a support or resistance level that has been in place for
a longer period of time usually gives you a bigger move than a support or resistance level that has
been in place for a short period of time with a cup and handle pattern.
We are looking for a move that would equal the measurement from the base of the cup which in this case
was around $11 to the lip of the cup which was around $16.
So we're looking for a $5 move the difference between 16 and 11 when the stock moves up.
We actually end up getting a much larger move than the $5 that we get from not only 16 to 21 which would
have been the $5 move here.
Now we see this stock encountered a little bit of resistance at this point.
It was able to break through retest this resistance level and then move higher up again as we talked
about to the $25 level.
So that is the cup and handle pattern and this stock of HMD.
I hope you've enjoyed this video on the cup and handle pattern.
This is Steven Adams and I look forward to seeing you in future videos.
Thank you.