Every chart pattern is known to have certain limitations. These common limitations of cup and handle pattern are also unavoidable.
Cup with handle pattern is a bullish continuation pattern that resembles the shape of a typical cup. It provides great opportunities for short-term traders as well as long term investors.
But, it is also having some discrepancies or limitations that are highly debatable among traders & investors. You can’t avoid them all together. Therefore, you need to remain cautious while trading cup with handle chart pattern.
It will help you to prevent unexpected losses, if the pattern goes against your assumptions anytime. Here are 6 simple limitations of cup with handle chart pattern:
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(1) Minor Discrepancies Are Always Likely To Occur
It is one of the most popular limitations of cup and handle pattern. Like every chart pattern, cup with handle chart pattern is also subject to some minor discrepancies in real time.
You can’t find a classic shape of a typical cup. If you want to argue regarding the typical shape of a cup then its not a cup.
Some of the minor discrepancies during formation of cup and handle pattern include shape of cup, height achieved on left & right side of cup, profit targets after breakout, base formation & many more.
You need to make positions only after accepting these discrepancies to some extent. However, if you are uncomfortable with some major discrepancies then it will be best strategy to either stay away or use strict stop loss order.
- Cup & Handle Limitations: PsychologyToday