(2) Bullish Breakout Usually Occurs During Morning Or Late Afternoon
It is one of the most shocking rules to analyze cup and handle chart pattern. Trading activities are not constant throughout the market hours. It keeps on changing from opening hours to the closing hours.
These trading activities can also affect the formation & breakout of cup with handle chart pattern. Generally, breakout after the formation of strong handle is usually found to occur during two times.
Firstly, it is likely to occur in the morning after a strong gap up opening. Secondly, it is likely to occur in the late afternoon. These time periods are best for a strong breakout in cup with handle pattern.
It is mainly due to the presence of necessary quite period during this time to form both cup and the handle. Traders or investors can’t find a more quite as compared to late afternoon.
At this time, most of the traders or investors are almost off at lunch or have finished trading for the day. Thus, time period of breakout can provide valuable hint about the true breakouts.
(3) Longer The Time Frame, More Will Be The Reliability Of Cup And Handle Pattern
It is one of the most surprising rules to analyze cup and handle chart pattern. Cup with handle pattern is a type of secondary or intermediate cycle correction. It usually occurs before the primary cycle regains its prior up-trend.
The minimum time taken for the formation of cup pattern is at least 7 weeks. However, there is no upper limit as some patterns can take as long as a year or even more.
Similarly, the handle formation may also take over 1 to 2 weeks. But, it can also extend up to several months depending on the time taken for cup formation.
The time spent by a financial instrument (e.g. stocks, bonds, commodities, etc.) for consolidation in bottom of cup is necessary to shake weaker shareholders.
This will in turn guarantee a long-term uptrend due to strong shareholders. One can find cup with handle pattern mostly on daily or weekly or even yearly charts.
The chart pattern represented by a longer time frame is often considered more reliable than the one formed over a shorter time frame. It is perhaps due to strong base formation over time.
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- Profit targets of cup and handle pattern: Forextraininggroup
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