The cup and handle is a bullish continuation pattern that looks exactly like its name: a rounded, U-shaped base (the cup) followed by a small downward drift (the handle), then a breakout above the rim. It reflects a healthy consolidation that shakes out weak hands before the next leg up.
Anatomy
The cup is a gentle U — a sharp V is less reliable, because the slow rounding shows orderly accumulation rather than a panic snap-back. The handle is a small pullback near the rim, on light volume, that shakes out the last late buyers. The breakout above the rim, on rising volume, completes the pattern.
How to trade it
The rim acts as the resistance/trigger level, much like a neckline. The handle's low is a natural invalidation — if price breaks below it, the shakeout has become a breakdown. The measured target projects the cup's depth upward from the breakout. Like all these patterns, it is strongest when it appears in an existing uptrend and breaks on a clear volume expansion.