What is cup and handle pattern?

A cup and handle pattern is a chart pattern that is commonly used in technical analysis to identify potential buy signals. It is formed by a "cup" shaped pattern in which the price of a security moves downward in a U-shaped curve, followed by a smaller downward move (the "handle") and a subsequent upward breakout. The pattern is thought to be a bullish reversal pattern because it indicates that the security's price may be reaching a support level and may be unable to break through to lower levels. When the price breaks through the resistance level (the top of the cup), it may signal that the downtrend has reversed and that the security is now in an uptrend.

The cup and handle pattern is typically considered a bullish reversal pattern because it follows a downtrend and is thought to indicate that the security's price may be reaching a support level and may be able to continue its downward trend. If the price breaks through the resistance level and continues to rise, it may confirm an uptrend.

It is important to note that the cup and handle pattern is not a guarantee that the price of a security will rise. It is simply a pattern that may suggest a potential trend reversal and should be used in conjunction with other technical and fundamental analysis tools to confirm a buy signal. In addition, cup and handle patterns can be subject to interpretation and may be influenced by the biases and expectations of the analyst. As a result, different analysts may come to different conclusions about the same data.