Let's do a bit of a deep dive into our Cup and Handle Pattern:
Definition: "Cup and Handle (C&H) -- A popular pattern that triggers a breakout through a triple top. Theformation draws a long and deep base after an intermediate high. The market rallies into a doubletop failure that creates the "cup". It pulls back in a small rounded correction that forms the"handle" and then surges to a new high." source: Farley, A. (2001). 3 Swing Trading Examples, With Charts, Instructions, And Definitions To Get you Started.
"Cup and Handle Pattern:A cup and handle formation is simply a rounding bottom with a handle. Cup andhandle formations are regarded as bullish reversal formations. Volume shouldgradually subside toward the middle of the formation and should ideally start toincrease thereafter, in anticipation of a breakout. This formation tends to develop over longer periods as compared to other chart patterns. The minimum upsideprice target is simply a one‐to‐one price projection based on the greatest heightwithin the cup and handle formation, measured from the breakout at the handle."
"Rounded bottoms are more common than rounded tops, but neither materializes often. They tend to belonger-term patterns, more easily identified in weekly or even monthly charts. They are reversal patterns, butthey can also appear in long price consolidations."
source: Charles D. Kirkpatrick II, CMT Julie Dahlquist, Ph.D., Technical Analysis The Complete Resource for Financial Market Technicians Third Edition 2016 by Pearson Education, Inc.
"If the trend is up and the cup and handle form in the middle of that trend, the buy signal has the added benefit of the overall trend. In this case, look for a strong trend heading into the cup and handle. For additional confirmation, look for the bottom of the cup to align with a longer-term support level, such as a rising trendline or moving average.If the cup and handle forms after a downtrend, it could signal a reversal of the trend... In some cases, the pattern may indicate a reversal when the price is in a long-term downtrend. It then forms a cup and handle that reverses the trend, and the price starts rising."source: https://www.thebalancemoney.com/trading-the-cup-and-handle-chart-pattern-4153469
The most famous is the “cup-and handle”formation described in detail by O’Neil (1988) but referred to in many earlier publications.
A cup and handle chart may also show a reversal pattern or a continuation pattern. A reversal pattern occurs when the price is on a downtrend, in the long run, forming a bowl with a handle to reverse the trend and when the price starts to rise. A continuation pattern occurs during an uptrend. The price rises, form a cup and handle, and then continues to rise. source: https://www.indiainfoline.com/knowledge-center/share-market/cup-and-handle-pattern
Why Slick thinks it must be in an uptrend. He is sticking to the 1970's rules, the problem is, during this time, back testing at large scale was not feasible simply because processing power was small. Since then, with the ability to back test, we have discovered that Cup and Handle Reversal patterns not only exist but according to the literature have been back tested. For example:
source: Kusuma, A. A., & Anggono, A. H. Portfolio Management of Kala Investama during the Pandemic in Indonesia Stock Market., Volume 7, Issue 3, March – 2022 International Journal of Innovative Science and Research Technology, ISSN No:-2456-2165
Back tested during a confirmed downtrend:
They said the following: "As it can be seen in figure 5, BBTN finally confirmed a strong breakout with large volumes, making the opportunity to reposition BBTN shares. It penetrated a cup and handle pattern and the blue line MACD position is also above the red line MACD. The target profit is achieve with 20.6% capital gain." source: Kusuma, A. A., & Anggono, A. H. Portfolio Management of Kala Investama during the Pandemic in Indonesia Stock Market., Volume 7, Issue 3, March – 2022 International Journal of Innovative Science and Research Technology, ISSN No:-2456-2165
Therefore, the evidence is in, the Cup and Handle reversal patterns has been demonstrated to not only exist, but according to some literature may be effective. I disagree @slick. Nice try though. Any comments @W3hunter?
With a few volume outliers (which allowed the inverse head and shoulders to appear) the ASX:MAY chart I believe is setting up a nice Cup and handle (reversal) pattern, then soon to follow, what I believe is the inevitable Golden cross, all leading up to the flow test of potentially ~100million barrels net to ASX:MAY on mean estimates from Independent Expert McDaniel & Associates Competent Persons Report dated 8 March 2022, 4 July 2022 and 28 July 2022.
Not often a confirmed discovery occurs of this magnitude, I believe it to certainly be a company maker. An ASX:MAY catalyst firestorm approaches... just a matter of time now.
MAY Price at posting:
9.7¢ Sentiment: Buy Disclosure: Held
(20min delay)