Cup with Handle         

Cup with Handle Formation

With pattern analysis, technical analysts look for specific trading patterns that have yielded consistent trends in trading history. One popular pattern is the Cup with Handle formation.

A Cup with Handle pattern is formed after the price hits a peak and then falls to form the left side of the cup pattern, then moves sideways forming the base of the cup, then rises to form the right side of the cup (usually under low volume). At this point the price hits resistance and pulls back, forming the handle of the cup. Traders consider this formation a predictor for higher prices. An upside breakout in high volume confirms the formation, predicting an upward trend. However, if the stock falls below the 200 day moving average when forming the handle, the upside breakout may not occur.

You can increase your profits in option trading by considering both fundamental analysis and technical analysis. When you are analyzing potential option positions, it helps to have a computer program like Option-Aid that swiftly calculates volatility impacts, probabilities, statistics, and other parameters of interest. These programs can pay for themselves with the first trade that they help you with.

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