Post by icemandios on Nov 26, 2015 0:38:56 GMT
William O'neill is credited with defining this pattern.
"The "cup and handle" formation was defined by William O'Neil"[2][4]link
On page 8 of this manual, you can see what some would call a C&H pattern at the bottom of the chart. Notice that O'Neill does not identify it as such, but he does so with a pattern that evolves higher up....after an advance.
www.investors.com/images/promotional/Cup-with-Handle_1028008.pdf
In fact, the closest he comes to identifying a C&H pattern without an advance is on page 14 where things were going more or less lateral.
Now, it's not me, and it's not the internet, it's the guy who defined the pattern.
But over the decades I've been doing this stuff, I've seen all manners of misinterpretations of stock patterns, and the C&H is the most abused construct of them all. For whatever reason, people tend to see what they want to see and disregard the basic elements outlined by the authors of patterns.
Times have changed, the market has changed in the worst ways. But the essence of the thing is still the essence of it. C&H's come after an advance or, more rarely, during a lateral move. They never come at bottoms. For bottoms, one has the Adam/Eve bottom, the Eve/Adam bottom, the W bottom, and the sucker's bottom shaped like a V. And some bottoms are formed by cup shaped accumulation patterns referred to as a "scallop pattern." In the best cases, these scallops tend to form again at ever higher levels. And that is called a "scalloping pattern." It indicates accumulation at increasingly higher levels. And that one is very good.
Once again, when viewing things at the right edge of the chart, to the casual observer, a proper C&H looks like a double top. And the handle looks like the double top is "working" and things are about to go south. And that's when things turn around and go north making it a C&H. One has to think about the psychology of the trader when seeing a "double top." And then seeing it not continue to plunge, but to move up. I hope you can see or feel the difference between that tension and surprise vs. the rather mundane various versions of a bottom. If not, well, in time.
"The "cup and handle" formation was defined by William O'Neil"[2][4]link
On page 8 of this manual, you can see what some would call a C&H pattern at the bottom of the chart. Notice that O'Neill does not identify it as such, but he does so with a pattern that evolves higher up....after an advance.
www.investors.com/images/promotional/Cup-with-Handle_1028008.pdf
In fact, the closest he comes to identifying a C&H pattern without an advance is on page 14 where things were going more or less lateral.
Now, it's not me, and it's not the internet, it's the guy who defined the pattern.
But over the decades I've been doing this stuff, I've seen all manners of misinterpretations of stock patterns, and the C&H is the most abused construct of them all. For whatever reason, people tend to see what they want to see and disregard the basic elements outlined by the authors of patterns.
Times have changed, the market has changed in the worst ways. But the essence of the thing is still the essence of it. C&H's come after an advance or, more rarely, during a lateral move. They never come at bottoms. For bottoms, one has the Adam/Eve bottom, the Eve/Adam bottom, the W bottom, and the sucker's bottom shaped like a V. And some bottoms are formed by cup shaped accumulation patterns referred to as a "scallop pattern." In the best cases, these scallops tend to form again at ever higher levels. And that is called a "scalloping pattern." It indicates accumulation at increasingly higher levels. And that one is very good.
Once again, when viewing things at the right edge of the chart, to the casual observer, a proper C&H looks like a double top. And the handle looks like the double top is "working" and things are about to go south. And that's when things turn around and go north making it a C&H. One has to think about the psychology of the trader when seeing a "double top." And then seeing it not continue to plunge, but to move up. I hope you can see or feel the difference between that tension and surprise vs. the rather mundane various versions of a bottom. If not, well, in time.
