Sun 14th Sept

A trader wrote to me over the w/e asking me to check out what he thought was a bullish Cup ‘n’ Handle pattern setting up on the stock: Apple (AAPL). This is how the weekly chart of AAPL was looking after Friday’s close.

Cup ‘n’ Handle patterns are bullish patterns and this is best explained with the help of a diagram. Price action in such patterns usually show a gradual decline followed by recovery to previous highs and in a rounded fashion. This gives the pattern the ‘Cup’ label. This period is then followed by a period of sideways consolidation in what forms up as the ‘Handle’. Technical theory states that any potential bullish continuation can be predicted to extend by the same order of magnitude as the height of the Cup pattern:

The chart of AAPL does seems to have the key ingredients of a potential Cup ‘n’ Handle pattern. There has been a rounded decline and recovery to $100 and we may now be starting to see some consolidation at the key and psychological $100 level. The height of the ‘Cup’ is about $40 and so traders could expect any bullish continuation move to be of about $40 as well and this would take the stock to $140.  Traders need to watch now for any bullish breakout from the channel trend lines of the ‘Handle’:

Summary: AAPL appears to be setting up in a bullish Cup ‘n’ Handle pattern on the weekly chart worth a possible $40 move. Traders need to watch the ‘Handle’ trend lines for any bullish breakout move.