The cup and handle pattern is a classic bullish signal in technical analysis, but how do you actually spot it and trade it on the ASX in 2025? This guide breaks down the anatomy of the pattern, practical trading tactics, and a real-world example using an Australian stock, so you can approach your next trade with clarity and confidence.

What Is the Cup and Handle Pattern?

The cup and handle is a chart formation that looks—quite literally—like a teacup. First spotted by William O’Neil, it’s a bullish continuation pattern signalling a possible breakout after a period of consolidation. Here’s how it forms:

The Cup: Price drops, stabilises, and then rises to roughly its previous high, creating a rounded ‘bowl’ shape.
The Handle: After the cup, a smaller, downward drift or sideways move occurs, forming the ‘handle’.
The Breakout: If price breaks above the resistance level at the top of the cup, it often triggers a strong upward move.

In 2025, with heightened algorithmic trading and tighter ASX regulation, clean patterns are prized for their clarity. The cup and handle remains a favourite among both retail and institutional traders due to its reliability—provided you know what to look for.

How to Identify and Trade the Cup and Handle

Spotting this pattern requires patience and a keen eye. Here’s a step-by-step approach for the Australian market:

Find the Cup: Look for a rounded bottom spanning several weeks to months. Avoid ‘V-shaped’ recoveries; the cup should be smooth and U-shaped.
Wait for the Handle: The handle typically drifts down 5–15% from the cup’s high and lasts 1–4 weeks. Volume often dries up during this phase.
Identify Resistance: Draw a line at the cup’s previous high. This is your breakout level.
Volume Confirmation: A true breakout is usually accompanied by a surge in trading volume, indicating conviction.
Set Your Entry: Traders commonly buy as price breaks above the resistance, or on the first pullback after breakout.
Target and Stop-Loss: The most common target is the depth of the cup added to the breakout point. Stop-losses are often placed just below the handle or the breakout level, depending on risk tolerance.

Tip: Not every cup and handle is textbook-perfect. In the fast-moving 2025 market, focus on patterns with clear symmetry and minimal overhead resistance.

Real-World Example: Cup and Handle on the ASX in 2025

Let’s look at a hypothetical—but realistic—example using a major ASX-listed tech stock, Atlassian (ASX: TEAM), which has seen increased volatility and liquidity following the 2025 market reforms.

Cup Formation: Between January and March 2025, TEAM drops from $120 to $100, then gradually recovers to $120 by late April—forming a smooth, rounded cup over three months.
Handle: From late April to mid-May, TEAM pulls back to $115, trading sideways with lower volume, forming the handle.
Breakout: In late May, TEAM surges above $120 on a spike in volume, closing at $125.
Trade Setup:
- Entry: Buy at $121 as price closes above $120 resistance.
- Target: Cup depth ($120 – $100 = $20) added to breakout ($120) gives a $140 target.
- Stop-Loss: Below handle at $114.

This setup leverages the pattern’s predictive power, while a disciplined stop-loss manages downside risk. In 2025, with AI-driven order flow and more transparent trading data on the ASX, such breakouts can attract significant momentum.

Risk Management and Final Thoughts

Trading the cup and handle is not without risk. False breakouts can and do occur—particularly in high-volatility sectors or during earnings season. To boost your odds of success:

Use position sizing that reflects your risk tolerance.
Watch for confirmation from volume and broader market trends.
Be aware of sector news and ASX announcements that could impact your trade.

In the 2025 landscape, with tighter ASX compliance and more automated trading, those who combine technical patterns with a sound risk framework are best placed to thrive. The cup and handle pattern remains a proven tool in your trading arsenal—if you use it wisely.