Inverted Cup and Handle

Definition:

An Inverted Cup and Handle pattern is formed after a pullback from a swing low sells off strongly to the prior swing low and stalls due to underlying support. The security then stalls much like a bear flag with slight upward pressure before breaking down below support.

Background:

The power of an Inverted Cup and Handle lies in the fact that after hitting underlying support from the prior swing low, a very minor correction is put in. The stock then breaks down past support which can be a sign that overhead supply in the security may be increasing.

Inverted Cup and Handle patterns can be stronger when the next logical place of support on the chart after the breakdown is a considerable distance away.

Practical Use:

Technical analysts often use Inverted Cup and Handle patterns as selling opportunities because of their ability to "prove" the lack of buying pressure during the timeframe being assessed.