Cup-With-Handle Base

Artile asal di sini.

What do Cisco, Home Depot, Microsoft, Apple and Whole Foods have in common? They all soared to lofty heights after breaking out of a cup-with-handle base.

Learning to recognize that pattern on a stock chart lets you buy in before the stock begins its big run.

The cup-with-handle base is one of the easiest patterns to spot — and one of the most powerful. On a stock chart it resembles a teacup as seen from its side view.

Cup with Handle

During the final stage of the base — after the stock has climbed up the right side of the pattern — it may pull back, etching a downward-sloping handle on its stock chart.

You might wonder why a slipping price is a sign of strength.

Here’s why: This last downturn serves to shake out any investors who might be prone to selling. Often they’re investors who bought into the stock before it fell into its correction. They held on through its downturn and now that it’s climbed back to where it was, they’re ready to sell.

Once those investors are gone, the stock faces less resistance as it breaks out of its base and heads higher. In other words, investors who held, and new investors who come in, all have more confidence in the stock, and are eager to invest more money.

Hammering Out A Base

Consider Tractor Supply. Back in 2003, the chain store had carved out niche for itself as a one-stop shop for everything from hammers to lawn furniture to farm equipment. Its secret: staffing its stores with ranchers, welders and horsemen who had the background experience to help its rural customers find just the right tool or nail to get the project done.

Its bottom line was booming. The company had logged triple-digit earnings growth gains during the previous three quarters. Meanwhile its sales were up more than 40% during the same three-quarter period.

If the stock popped up on your radar, knowing how to read its price-volume chart would help you buy at the optimal time.
So let’s take a look at its base.

contoh cup with handle

Tractor Supply scored some hefty share price gains in 2002, then fell into what would become a cup-with-handle base in December of that year.

As it scaled the right side of that base in the spring of 2003, its share price briefly declined, forming a handle pattern.
Then, in early June, its share price vaulted higher as its trading volume rose.

This action is known as a breakout. It occurs as a stock climbs past a point where it had previously run into resistance.
Ideally volume will rise at least 50% above the average level as a stock breaks out of its base. That shows you big, institutional investors are snatching up shares and helping to push its price higher.

A breakout from a base gives you an opportunity to buy a stock.

To calculate the buy point in a cup-with-handle base, add ten cents to the price at the top of the handle pattern. It’s a little extra insurance about the breakout’s power.

In Tractor Supply’s case, the handle’s peak was at $46.21, so adding ten cents gave us a buy point of $46.31.
Although this is the stock’s ideal buy point, you don’t have to buy exactly at that price. Rather, you can buy a stock until it’s up to 5% above its buy point. In Tractor Supply’s case, it was in buying range until its price hit $48.62.