Reverse Cup Pattern in Crypto: Understanding and Acting

Understanding the Inverted Handle Cup Model

The inverted cup with handle is a bearish continuation chart pattern characterized by the formation of two consecutive peaks. The first peak, which is higher, represents the inverted cup, followed by a second, less pronounced peak forming the inverted handle.

Key features of the model

This pattern is characterized by its lows touching a support line. A break of this support downwards confirms the formation of the pattern and generates a sell signal. The depth of the cup serves as a reference to estimate the theoretical price target of the upcoming bearish trend.

Use in Technical Analysis

Technical analysts use this model to anticipate the continuation of a bearish movement in the financial markets. It typically appears after a downtrend phase and suggests an increased likelihood of further price declines.

Identification of Trading Opportunities

The inverted cup with handle allows traders to identify potential selling opportunities. Once the pattern is validated by the break of the support level, traders can enter short positions with a clearly defined price target, calculated based on the height of the cup.

Implications for Market Trend

The formation of this model generally reveals persistent selling pressure in the market. It indicates that buyers lack the conviction to reverse the current downward trend, paving the way for a new phase of price decline.