In this chart lesson, we will learn how the simple cup with handle pattern can help a trader to spot a big move in a stock. Therefore, giving him or her a superb trading opportunity that lasted for just 12 days.
The cup with handle pattern is a classic bullish reversal pattern that you should learn to recognize. If you learn to do so, you may be able to spot some of the biggest moves there are in the stock market.
CTXR was correcting from the start of May 2021 to mid May 2021.
First of all, the technical concept that helped CTXR to stop dropping is the 50 day moving average.
The 50 MA is a very popular moving average which you SHOULD always look at. This MA is widely followed by many traders and investors and therefore have the self fulfillment of acting as a support.
As CTXR meets the 50 MA, it was actually dropping to an area of price support as well.
The price congestion on the left created a price support area. Congestion areas are usually support area. So if you see your stock dropping to an area where there is a lot of trading in the past, that will be your reference point for a strong support.
Notice that CTXR also has a bullish cross. This is where the 20 MA crosses back above the 50 MA. When the faster MA crosses back above the slower 50 MA, I call this a bullish cross.
Bullish cross gives more weight to a stock's bullish move. Somehow I have found them to be an added bonus if you are hoping that the stock will go up. Some simple trend following technique that I have found to be extremely useful.
CTXR rose a bit but eventually traded sideways near the daily 20 MA.
I have often found that if a stock trades sideways near the 20 MA, it can break out higher very fast a nicely.
As CTXR was trading sideways at the 20 MA, it was actually forming the handle of the cup with handle pattern. I wonder if you can see the cup with handle pattern.
CTXR eventually broke out of the handle and proceeded to move higher. Eventually the public also recognizes this stock. Heavy volume came in and force the stock to move higher.
A rapid rise followed by a large red candle gave us a signal that the stock is very overbought. It is time to get out of the stock as the public has started to chase this stock.
Perhaps it might be easier for you to spot the cup with handle in the weekly chart.
Even before the handle breakout, the stock was already above the rising weekly 20 MA. A stock that is above its rising weekly 20 MA is bullish and can often rise a lot.
As the stock rose, it formed a topping tail in the weekly chart. This hinted of a slowing down in bullish momentum. The topping tail is also a bearish reversal candlestick pattern. Funny how you can often find this when a stock starts to top out.
The topping tail appeared at the long term trend line resistance. This is something to take note for us. When a stock hits a trend line, it can often stall and reverse down.
Hope you enjoy this lessons and may it add to your technical knowledge.
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