Learning stock chart patterns is a useful skill to get into winning stocks before they break out. Among the handful of patterns worth mastering is the cup-with-handle base and a variation called a cup-without-handle base.
Amazon stock was one winner born out of a cup without handle, as we'll explain here. Bullish base patterns are most commonly built following a prior uptrend of at least 20% to 30%. Once a stock rallies that much, it will usually pause to form a new base.
Both the cup with handle and cup without handle base begin by forming a "U" shaped pattern. They are identified by MarketSurge pattern recognition on daily and weekly charts.
The bottom of the base shakes out weak holders before the stock reverses and begins building the right side of the cup.
If a stock climbs then retreats and takes a break for at least a week before breaking out, it may form a handle. A proper handle should form in the upper half of the base and be no deeper than 12%. The handle serves as a final place to get rid of weak hands, before the stock climbs in earnest.
Key Features Of Cup Without Handle
In a cup without handle, the stock doesn't pause. Instead, it bursts to new highs right from the cup.
A cup without handle must be at least six weeks long, though it can last for months. The cup should be no deeper than 33% from the beginning of the base to the bottom of the formation. The buy point is the stock's prior high.
Like in other base breakouts, the buy zone goes from the buy point to 5% higher.
The breakout should come in volume at least 40% above the stock's average over the past 50 days. (Volume bars with the 50-day moving average are shown in IBD Charts and MarketSurge.)
Amazon Stock, JPMorgan Bases
JPMorgan Chase formed a cup base in August through November (1). The base had a choppy bottoming area, but still could be viewed as a cup pattern.
Shares broke out the week of Dec. 15 (2) in volume well above the weekly average (3). JPMorgan climbed to an all-time high on Tuesday and has gained over 21% since the breakout.
Amazon.com formed a cup base that began in September 2023 after an excellent run from its January 2023 low. The stock declined 19% as it formed the base.
Shares broke out past 145.86 buy point the week of Nov. 17. Volume climbed from the prior week. Amazon stock climbed around 23% to a 52-week high in March.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
