How the pattern unfolds
The setup
Stock A carves a rounded base from a prior high near the rim at 120, recovering back toward that rim.
What triggers it
Near the rim, a shallow handle pullback forms, then price breaks above 120 (the rim) on rising volume.
What it means — and does not
The rounded base, handle, and rim breakout is the cup-and-handle structure. As with all breakouts, a decisive close and follow-through are what watchers look for, and the breakout can still fail.
- Price / index level
- Volume
- Rim / breakout · 120
A rounded base recovers to the 120 rim, forms a handle (days 11-12), then breaks out.
Show the underlying data
| Day | Price / index level | Volume |
|---|---|---|
| 1 | 120 | 1.2 |
| 2 | 114 | 1 |
| 3 | 108 | 0.9 |
| 4 | 104 | 0.8 |
| 5 | 102 | 0.8 |
| 6 | 103 | 0.8 |
| 7 | 107 | 0.9 |
| 8 | 112 | 1 |
| 9 | 117 | 1.1 |
| 10 | 120 | 1.2 |
| 11 | 118 | 0.9 |
| 12 | 116 | 0.9 |
| 13 | 121 | 1.6 |
| 14 | 125 | 1.7 |
What this does not establish
The breakout is invalidated if price closes back below the 120 rim after breaking it. The handle low is conventionally treated as the invalidation level, and a stop-loss is anchored below it. A move back under the handle means the base was not complete. The conventional measured move adds the cup to the rim. It is a sizing convention practitioners quote, not a forecast, and it is void the moment the rim fails.
Confirmation checklist
4Is the base genuinely rounded, with a smaller handle near the rim?
Did price break the rim decisively on rising volume?
Did the breakout follow through, or fall back below the rim (a failed break)?
Remember: continuation patterns can fail. This is not a signal.
Common mistakes reading it
2Forcing a cup-and-handle label onto any rounded move.
Acting before a decisive close above the rim.
A cup-and-handle completes and price closes above the rim. What is the honest description?
- The structure completed — and, like every breakout in this library, it can still fail
- The pattern implies a level price will go on to reach
- The handle shook out weak holders
Show the answer
A. The structure completed — and, like every breakout in this library, it can still fail
Naming a structure describes its shape. Measured targets and shakeout stories are interpretations layered on top, and neither is established by the example on the page — which, like every breakout here, could equally have failed at the rim.
Frequently asked
3What is the handle in a cup and handle?
The handle is a shallow pullback near the cup's rim, before the breakout above the rim.
Does a cup and handle always break out?
No. Like any pattern it can fail. Watchers look for a decisive close above the rim and follow-through, with no guarantee.
Is this a buy signal?
No. It is an educational description of a continuation structure, not a recommendation.