When I discovered the Inverted Cup with Handle pattern during the devastating bear market from April 2000 to September 2002 I had no idea how it would change the way people would trade in the future. Prior to this time no one had ever mentioned anything about the Inverted Cup with Handle. Today many guru’s on the internet claim to be experts on the Inverted Cup with Handle. It doesn’t take long to find they don’t understand the basic concepts of this little gem.
It wasn’t until I developed the indicator used to depict the Inverted Cup with Handle pattern on a stock chart that I became aware of how it works with the Cup with Handle pattern to give us a total of eight well defined trading strategies. This led to our development of the CupScan© technology that we use to scan over 8000 stocks each day to search for both the Cup with Handle and Inverted Cup with Handle setups. Our stock screens also include a search for those stocks that broke out on the day of the scan. This information is reported in our Daily and Weekly CupWatch Report. The symbols that are reported in the CupWatch Report are placed in a computerized CupAlert© system that sends an email alert, during real time stock market hours.
Our program leaves very little for the trader/investor to do at the end of the day except to determine which stocks they wish to trade. Of course we cannot make that decision for them as it would be a violation of the SEC laws. To complete the trading process for our clients we offer them the CupTrade Strategies©. This is a set of 10 computerized trading systems that will automatically trade any setup the trader wishes merely by installing the strategy into the chart for that particular stock. This gives the individual investor the opportunity to trade the stock market while at their place of employment without having to set in front of a computer screen all day.
The Inverted Cup with Handle is used to tell when a stock breaks to the downside in a bearish market. The chart for Discovery Communications Inc. (DISCA) is a good example of what happens if the Inverted Cup with Handle breaks down when the stock market is bullish. If the price closes below the Pivot Point TrendLine and then reverses back up and crosses above the TrendLine we have what I call the Reversed Inverted Cup with Handle Trade. This usually happens when the stock has been in a prolonged down trend, then consolidates forming the Inverted Cup with Handle pattern while the overall market is bullish. This has become one of my favorite trades. It allows the trader to get in at the lowest possible price with little risk.