Pattern identification is not enough in stocks markets. These profitable trading strategies for cup and handle pattern are equally important.
In technical charts, cup with handle is a bullish continuation pattern. It can be compared to the typical shape of a tea cup. This chart pattern was originally introduced by William O’Neil.
A true cup with handle pattern can generate huge profits quickly. However, in real time, the process of recognizing & trading such pattern is not as easy as it may appear theoretically.
Traders & investors have to face several discrepancies that may confuse them from time-to-time. Simultaneously, you need to adopt different trading techniques to protect your investments.
Additionally, it will also help you to minimize your losses in an untoward situation. Here are 12 hidden trading secrets or strategies to deal with cup with handle chart pattern:
[You can also watch an exciting video on this post from GetUpWise channel on YouTube.]
(1) Buying Stocks Only After Bullish Breakout Near Ideal Buying Point
It is one of the most significant trading strategies for cup and handle pattern. Several traders are interested to buy stocks or bonds undergoing cup with handle pattern formation only after confirmed breakout signals.
In this trading strategy, short-term traders wait for making buy positions until bullish breakout happens in the chart pattern. Once the breakout happens, they rush to buy stocks or bonds to make money quickly. But, what is the ideal buying point in cup and handle pattern after breakout?
According to a post published in Investors, the ideal buy point from a cup-with-handle base appears at the highest point of handle, plus 10 cents.
However, the ideal buying range is usually up to 5% above the ideal buy point. For example, if the peak in the handle of a stock is at $40 then add 10 cents to get the ideal buy point of $40.10. Now, the buying range would be from $40.10 to $42.10 i.e. 5% above the ideal buy point.
Thus, conservative traders looking to gain quick profits should buy as close as possible to the ideal buy point. However, if you missed the chance to buy within safe buying zone then buying at extended price will increase risk rather than rewards.
- Trading strategies for cup and handle pattern: Investopedia