Predicting Short-Term Trends: The Cup-With-Handle Pattern
Price charts are one of the most widely used tools in technical analysis. What do charts reveal? One item technical analysts like to look for is repeating patterns—these can be used to forecast future price movements and, in some cases, the potential magnitude of such movements.
This article examines a price pattern identified by William O’Neil, founder of Investor’s Business Daily—the cup-with-handle pattern.
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In addition to his role as a publisher, William O’Neil is well-known for his CANSLIM investment approach, which uses both fundamental and technical analysis to identify potential investment opportunities. [O’Neil’s CANSLIM approach is outlined in his book “How to Make Money in Stocks,” McGraw-Hill Company; 272 pages; $10.95.] Beyond the more concrete criteria that make up CANSLIM, O’Neil looks for stocks that are exhibiting specific patterns, the most common being the cup-with-handle pattern.
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