The Cup and Handle is a bullish continuation chart pattern where the price forms a rounded bottom (the cup) followed by a smaller downward-drifting consolidation (the handle) before breaking out to the upside. The pattern typically forms over several weeks to months and is confirmed when the price breaks above the resistance level at the top of the cup. Volume usually decreases during the handle formation and increases on the breakout, which traders use as confirmation of the pattern.
Example
“A stock trades at $50, dips to $40 forming a rounded cup bottom, recovers to $50, then pulls back slightly to $47 forming the handle. When the price breaks above $50 on increased volume, traders enter long positions targeting a measured move to $60.”