Cup-With-Handle Base

Source: IBD

Note: Pattern also tells the psychology of investors. Here in this pattern, who holds the stock during downturn, will get out of it as soon as stock reaches his purchase point. This is intuitive.  Staying with it is not intuitive but right one.

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.

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.