The cup and handle pattern will appear on a price chart when a new bullish trend is being tested by traders to determine its validity.
It presents itself as a gradual decline, creating a sloping line, which is followed by a gradual return to previous levels. This creates the “cup” in the pattern.
Once the cup has been formed traders will test the market once again, and a rapid downward move will be seen that’s smaller and shorter in duration than the move that created the cup. This creates the handle in the cup and handle pattern.
This type of pattern is considered a bullish continuation pattern, and once the handle has been formed the uptrend in price will resume.