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Replies to #28948 on lowtrade

lowtrade

02/29/12 2:21 PM

#28949 RE: trader guy #28948

The difference between cup & handle continuation pattern and rounded bottom reversal pattern is resistance break, on increasing volume for the rounded bottom. And most obvious the prior up trend for cup & handle.

Need to think about mindset leading into and out of the formation.

With the rounded bottom trend is negative and with resistance break on increasing volume, conformation is seen for a mindset change, at that previous high resistance level. Thus it's called a reversal in mindset.

With the cup & handle trend is positive and with stall and basing at high resistance, mindset determines if continuation is warranted during the handle. Once handle break occurs mindset continues positive and continuation is confirmed at high resistance break.

If no prior up trend is present in a cup, or increased volume at previous resistance in a bottom. Then neither similar U shapes has anything to do with calculation of a projected price movement. Because the pattern requirements are not there and the pattern is not there, only the U.

The key to the cup & handle is handle break before 61% FIBs and the key to rounded bottom is increasing volume at high resistance. With out those, both patterns should be thought of as unreliable and not traded for pattern projections.

With the cup & handle pattern. I have made personal restictions of lips within 5% of each other and handle break before 50% FIBs. Only because experience has shown me, if these are not present, projected target is rarely completely reached. For rounded bottoms, I like 3 days of increasing volume or a one day volume double to feel confident projections will be reached. Again personal restictions.