Cup and Handle

A cup and handle is a bullish continuation pattern in which price forms a rounded, U-shaped decline and recovery back to a prior high (the cup), then pulls back modestly in a short downward drift (the handle) before breaking out above the rim. Popularized by stock trader William O'Neil, the pattern depicts gradual accumulation: sellers exhaust themselves in the rounded base, buyers patiently absorb supply on the way back up, and the handle shakes out the last weak holders before the advance resumes.

For example, suppose Bitcoin peaks at $70,000, declines and bases over several months in a smooth curve down to $55,000 and back, then pulls back from $70,000 to $66,000 in a tight two-week handle. A breakout above the $70,000 rim on strong volume triggers the pattern, with the classical target adding the cup's depth to the breakout — around $85,000 here.

Quality signs include a rounded rather than V-shaped cup, a handle that stays in the upper half of the cup's range, and volume that dries up in the handle before expanding on the breakout. A common misconception is that any dip-and-recovery qualifies; a sharp V-bottom or a deep handle that undercuts the cup's midpoint weakens the pattern, and it remains unconfirmed until the rim actually breaks.