Mastering the Cup and Handle with Dan Zanger

The Anatomy of a Cup and Handle

The cup and handle is a classic bullish continuation pattern. It consists of a "cup," which is a U-shaped price formation, followed by a "handle," which is a slight downward drift in price. The cup should be a rounded bottom, not a V-shape. The handle should be a tight consolidation, with a downward slope. The pattern is complete when the price breaks out above the resistance level formed by the top of the handle.

Dan Zanger's Entry and Exit Rules

Zanger's entry for a cup and handle is precise. He buys as the stock breaks out above the handle's trendline, on massive volume. His initial stop-loss is placed just below the low of the handle. As the stock moves in his favor, he will trail his stop-loss to lock in profits. His exit strategy is not based on a specific price target, but rather on the stock's behavior. He will sell if the stock shows signs of weakness, such as a breakdown of a key support level or a significant drop in volume.