A chart pattern known as a "inverted cup and handle" shows bearish continuation and signals a sell signal. Consider it a cup with a handle that is upside down. There is a clear 'u' shape and downward handle in the normal cup and handle pattern, followed by a bullish continuation.
The Cup and Handle inverted pattern creates an upside-down cup and handle. A pullback from a swing low precedes a sell-off to the prior swing low, and the pattern stops due to underlying support. The stock then stalls with minor upward pressure, similar to a bear flag, before breaking down below support.
The cup can last anywhere from one to six months, and in some cases even longer. The handle should take 1-4 weeks to develop and finish. When the stock breaks out or rises higher through the old point of resistance, it is called a buy point (right side of the cup). With sufficient volume, this breakout should occur.
It occurs when a downward price wave is followed by a period of stabilisation. After then, prices rise to about equalise the previous fall. It forms a U-shape, or "cup," in the "cup and handle." Within a channel, the price then travels sideways or downward, forming the handle.
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